Supreme Court of India
MADRAS BAR ASSOCIATIONversusUNION OF INDIA AND ANOTHER
- Citation
- 2014 INSC 685
- Decided
- 25 September 2014
- Disposal
- Disposed off
- Bench
- RAJENDRA MAL LODHA
Holding
The National Tax Tribunal Act, 2005 is unconstitutional because it transfers the core judicial function of deciding substantial questions of law from High Courts to a tribunal that does not possess the same independence, stature, and security of tenure as High Courts, thereby violating the basic structure of the Constitution and recognized constitutional conventions.
Summary
The Madras Bar Association challenged the constitutional validity of the National Tax Tribunal Act, 2005, which sought to transfer appellate jurisdiction from High Courts to a newly created National Tax Tribunal (NTT) for deciding substantial questions of law in tax matters. The Supreme Court held that while Parliament has the power to transfer jurisdiction from courts to tribunals, such tribunals must possess the same independence, stature, and security of tenure as the courts they replace. The NTT Act failed this test: its composition included technical members without legal qualifications, its appointment process involved executive secretaries, its tenure of five years with reappointment undermined independence, and its mandate to sit ordinarily in Delhi rendered the remedy inefficacious. The Court also held that allowing chartered accountants to represent parties before the NTT was invalid, as the tribunal decides only substantial questions of law, which require legal expertise. The Court declared that the power to decide substantial questions of law is a core judicial function that under the constitutional scheme belongs exclusively to superior courts (High Courts and Supreme Court) and cannot be transferred to a tribunal. Consequently, the entire National Tax Tribunal Act, 2005 was declared unconstitutional and set aside.
Issues considered
- Whether the National Tax Tribunal Act, 2005 violates the basic structure of the Constitution by impinging on the power of judicial review vested in High Courts.
- Whether the transfer of adjudicatory functions from High Courts to the National Tax Tribunal violates recognized constitutional conventions under the Westminster model.
- Whether Sections 5, 6, 7, 8, and 13 of the National Tax Tribunal Act are unconstitutional for undermining the independence of the judiciary.
- Whether Section 13(1) of the Act, insofar as it allows chartered accountants to represent parties before the NTT, is valid.
- Whether company secretaries should be allowed to appear before the NTT to represent parties.
- Whether Article 323B of the Constitution (inserted by the 42nd Amendment) is violative of the basic structure.
Legislation cited
- Central Excise Act, 1944s. 35G, s. 35H
- Code of Civil Procedure, 1908s. 100, s. 115
- Constitution of Indias. 225, s. 226, s. 227, s. 323B, s. 368, s. 50
- Customs Act, 1962s. 129A, s. 130
- Income Tax Act, 1961s. 256, s. 257, s. 260A
- National Tax Tribunal Act, 2005s. 13, s. 15, s. 24, s. 5, s. 6, s. 7, s. 8
Subjects
Constitutional validityNational Tax Tribunaljudicial reviewbasic structureseparation of powersindependence of judiciarytribunalsubstantial question of lawHigh Court jurisdictiontax law
Judgment
[2014] 10 S.C.R. 1
MADRAS BAR ASSOCIATION A
v.
UNION OF INDIA AND ANOTHER
(Transferred Case (C) No. 150 of 2006)
SEPTEMBER 25, 2014
B
[R.M. LODHA, CJI., JAGDISH SINGH KHEHAR, J.
CHELAMESWAR, A.K. SIKRI AND R.F. NARIMAN, JJ.]
National Tax Tribunal Act, 2005:
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.
E
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
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] [259-
E, F; 270-E-H; 271-A-B; 272-F]
Kesavananda Bharati v. State of Kera/a (1973) 4 SCC
F
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.
2.2. All Appellate Tribunals relevant for the present
controversy were essentially comprised of Judicial F
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] [275-
H; 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 D
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 E
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 F
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
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
unsustainable in law. [Paras 75, 77, 78] [280-G, H; 307-E-
0
H; 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 E
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
F
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.
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 A
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, B
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
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; 313-
A-C]
D
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 E
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
F
appellate purview of the jurisdictional High Courts. The
appointment of Accountant Members and Technical
Members of the Appellate Tribunals to the NIT, would be
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
Supreme Court. In view of the aforestated appellate
0
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; 314-
A-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 A
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 B
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 c
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 D
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]
E
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 F
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 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
rigid separation of powers. Despite that, the Constitution
0
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. B
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 c
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
D
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 E
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 F
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]
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. A cursory
G reading of the substituted clause shows that the old
section 107 of the Government of India Act 1915 was
brought back: Tribunals were no longer subject to the
High Courts' superintendence, and subordinate courts
were only subject to the High Courts' superintendence,
H if they were also subject to its appellate jurisdiction. The
MADRAS BAR ASSOCIATION v. UNION OF INDIA 21
44th Amendment undid this and restored sub-clause (1) A
to its original position. However, Art. 3238 continues as
part of the Constitution. The real reason for the insertion
of the said article was the same as the amendment made
to Art. 227 - the removal of the High Courts' supervisory
jurisdiction over tribunals. [Paras 24 to 261 [336-E, G, H; B
337-A]
4. The National Tax Tribunal which replaces the High
Courts in the country replaces them only to decide
substantial questions of law which relate to taxation. In
fact, a Direct Tax Laws Committee delivered a report in c
1978 called the Choksi Committee after its Chairman.
This report had in fact recommended that a Central Tax
Court should be set up. This recommendation was not
acceded to by Parliament. It is obvious, that substantial
questions of law which relate to taxation would also o
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 have under our constitutional
scheme to be decided by the superior courts and the E
superior courts alone. [paras 30, 31] [342-C; 347-E-F]
5. The National Tax Tribunal is interposed between
the appellate Tribunal and the Supreme Court for the verj
good reason that ultimately it will only be the Supreme
Court that will declare the law to be followed in future. As F
the appellate tribunal is already a second appellate court,
it would be wholly unnecessary to have a National Tax
Tribunal decide substantial questions of law in case of
conflicting decisions of High Courts and Appellate
Tribunals as these would ultimately be decided by the G
Supreme Court itself, which decision would under Article
141 be binding on all tax authorities and tribunals.
Secondly, in all tax matters, the State is invariably a party
and the High Court is ideally situated to decide
substantial questions of law which arise between the
H
22 SUPREME COURT REPORTS [2014] 10 S.C.R.
State and private persons, being constitutionapy
f...
completely independent of executive control. It is well
settled that an appeal is a creature of statute and can be
done away by statute. The question posed here is
completely different and the answer to that question is
B fundamental to our jurisprudence: that a jurisdiction to
decide substantial questions of law vests under our
constitution, only with the High Courts and the Supreme
Court, and cannot be vested in any other body as a core
constitutional value would be impaired thereby. Chandra
C Kumar and R. Gandhi have allowed tribunalization at the
original stage subject to certain safeguards. The
boundary has finally been crossed in this case.
Therefore, the National Tax Tribunals Act is
unconstitutional, being the ultimate encroachment on the
exclusive domain of the superior Courts of Record in
0
India. [paras 32, 37, 41] [647-H; 348-A-C; 352-C; 354-G-H]
Union of India v. R. Gandhi (2010) 11 SCC 1: 2010
(6) SCR 857; Waryam Singh v. Amarnath 1954 SCR 565;
East India Commercial Co. Ltd. Calcutta v. The Collector of
E Customs (1963) 3 SCR 338; Sir Chunilal V. Mehta v. The
Century Spinning and Manufacturing Co. Ltd. (1962) Suppl.
3 SCR 549; Kanhaiya Lal Mukundlal Saraf's case 1959 SCR
1350; L. Chandra Kumar v.Union of India (1997) 3 SCC 261:
1997 (2) SCR 1186; Union of India v. R. Gandhi (2010) 11
F SCC 1: 2010 (6) SCR 857 - referred to.
Attorney General for Quebec v. Farrah (1978) Vol.86
DLR [3d] 161; Re. Residential Tenancies Act 123 DLR (3d)
554; Hins v. The Queen Director of Public Prosecutions v.
Jackson Attorney General of Jamaica (intervener) 1976 (1)
G All ER 353; Proprietary Articles Trades Association v.
Attorney General for Canada 1931 AC 311 - referred to.
PER JAGDISH SINGH KHEHAR. J.
Case Law Reference:
1998 (1) SCR 793 referred to Para 24
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 23
(1968) 3 SCR 662 referred to Para 37 A
c201 O) 11 sec 87 relied on Para 41
1987 (1) SCR 485 referred to Para 42
(1988) 1 sec 122 referred to Para 42
1988 (2) SCR 871 referred to Para 43 B
1997 (2) SCR 1186 referred to Para 51
2002 (2) SCR 450 refel'red to Para 51
2003 (1) SCR 397 referred to Para 51
1955 SCR 829 referred to Para 51 c
1972 (2) SCR 33 referred to Para 51
1973 (0) Suppl. SCR 1 relied on Para 55
1976 SCR 347 relied on Para 56
1981 (1) SCR 206 relied on Para 57 D
· 1982 SCR 365 relied on Para 58
1987 (1) SCR 435 relied on Para 59
1997 (2) SCR 1186 referred to Para 60
1994 (6) Suppl. SCR 261 relied on Para 60 E
(1987) 1 sec 422 referred to Para 60
1990 (3) SCR 946 referred to Para 60
(1991) 1 sec 181 referred to Para 60
1993 (3) SCR 802 referred to,. Para 60 F
'·
(1994) 2 sec 410 referred to Para 60
2010 (6) SCR 857 referred to Para 61
2010 (6) SCR 957 referred to Para 62
1990 (2) Suppl. SCR 433 referred to Para 62 G
1997 (4) Suppl. SCR 514 referred to Para 75
(2002) 6 sec 252 referred to Para 75
H
24 SUPREME COURT REPORTS [2014] 10 S.C.R.
A PER R.F. NARIMAN. J.
Case Law Reference:
2010 (6) SCR 857 referred to Para 3
1954 SCR 565 referred to Para 14
B (1963) 3 SCR 338 referred to Para 15
(1962) Suppl. 3 SCR 549 referred to Para 17
1996 (10) Suppl. SCR 585 Distinguished Para 21
1959 SCR 1350 referred to Para 26
c 1997 (2) SCR 1186 referred ,to Para 26
2010 (6) SCR 857 referred to Para 28
CIVIL ORIGINAL JURISDICTION : Transfer Case (Civil) No.
150 of 2006.
D Under Article 139 of the Constitution.
WITH
C.A. Nos. 3850, 3862, 3881, 3882, 4501 and 4052 of 2006.
T.C. (C) Nos. 116, 117 and 118 of 2006.
E W.P. (C) Nos. 621 and 697 of 2007.
Ranjit Kumar, SG., Arvind P. Datar, Ambuj Agrawal,
Akanksha Dhananjay Baijal, Nikhil Nayyar, Vikram Gulati, Binu
Tamta, Abhinav Mukherji, Aparajita Singh, Arijit Prasad (for B.V.
Bairam Das), B.D. Makheeja, B.K. Satija K.C. Dua, Shibashish
F Misra, Rustom B. Hathikhanawala, E.C. Vidya Sagar for the
Petitioner.
Mukul Rohatgi AG., Ranjit Kumar, SG., K.V. Vishwanathan,
Arvind P. Datar, Pravin H. Parekh, Binu Tamata, Abhinav
Mukherji, Aparajita Singh, Arijit Prasad (for B.V. Bairam Das),
G Pramod Dayal, Nikunj Dayal, Payal Dayal, Gauthan Bhardwaj,
A.S. Kaushik, Mehul M. Gupta, Adeeba Mojahid, K.C. Dua,
Ardhendumauli Kumar Prasad, Aviral Shukla, Pankhuri
Bhardwaj, Amit Rai, Priyadarshi Chaitanyashil, Vikas Jain,
Nikhil Nayyar, Satya Mitra Gard, E.R. Kumar, Ritika Sethi,
H Abhishek Vinod Deshmukh, Priyanshi Chandarana (for Parekh
MADRAS BAR ASSOCIATION v. UNION OF INDIA 25
& Co.), Rustom B. Hathikanawala, Gagan Gupta, Parmanand A
Gaur and Ajay Pal for the Respondents.
The Judgment of the Court was delivered by
JAGDISH SINGH KHEHAR, J.
The Controversy: B
1. All the above cases are being disposed of by this
common judgment. The issue which arises for consideration
before us, in the present bunch of cases, pertains to the
constitutional validity of the National Tax Tribunal Act, 2005
(hereinafter referred to as, the NTT Act). Simultaneously, the C
constitutional validity of the Constitution (Forty-second
Amendment) Act, 1976 has been assailed, by asserting, that
the same violates the basic structure of the Constitution of India
(hereinafter referred to as, the Constitution), by impinging on
the power of "judicial review" vested in the High Court. In the o
event of this Court not acceding to.Jhe aforementioned prayers,
a challenge in the alternative, has been raised to various
provisions of the NTT Act, which has led to the constitution of
the National Tax Tribunal (hereinafter referred to as, the NTT).
The NTI, according to the learned counsel for the petitioners, E
is styled as a quasi-judicial appellate tribunal. It has been
vested with the power of adjudicating appeals arising from
orders passed by Appellate Tribunals (constituted under the
Income Tax Act, the Customs Act, 1962, and the Central Excise
Act, 1944). Hitherto before, the instant jurisdiction was vested . F
with High Courts. The pointed issue canvassed in this behalf
is, that High Courts which discharge judicial functions, cannot
be substituted by an extra-judicial body. Additionally, it is
maintained that the NTT in the manner of its constitution
undermines a process of independence and fairness, which are
sine qua non of an adjudicatory authority. G
The Historical Perspective:
The Income Tax Legislation. in India:
2(i). Law relating to income tax dates back to 1860, when
H
26 SUPREME COURT REPORTS [2014] 10 S.C.R.
A legislation pertaining to levy of tax on income, was introduced
in India for the first time. The original enactment was replaced
by subsequent legislations, enacted in 1865, 1886, 1918 and
1922. The Indian Income Tax Act, 1922 (hereinafter referred to
as, the 1922 Act) was brought about, as a result of the
B recommendations of the All India Tax Committee. The 1922 Act
can be described as a milestone in the evolution of direct tax
laws in India. Detailed reference needs to be made to the
provisions of the 1922 Act.
(ii) After the procedure provided for assessment of tax had
C run its course, and tax had been assessed, an executive-
appellate remedy was provided for, before the Appellate
Assistant Commissioner of Income Tax (under Section 30 of
the 1922 Act). A further quasi-judicial appellate remedy, from
decisions rendered by the first appellate authority, lay before
D an appellate tribunal (hereinafter referred to as the Appellate
Tribunal). Section 33A was inserted by the Indian Income Tax
(Amendment) Act, 1941. It provided for a remedy by way of
revision before a Commissioner of Income Tax.
(iii) The remedy before the Appellate Tribunal (provided
E under Section 5A of the 1922 Act, by Section 85 of the Indian
Income Tax (Amendment) Act, 1939), was required to be
exercised by a bench comprising of one Judicial Member and
one Accountant Member. It was permissible for the President
of the Appellate Tribunal or any other Member thereof, to
F dispose of appeals, sitting singly (subject to the condition, that
the total income of the assessee, as computed by the assessing
officer, did not exceed Rs.15,000/-). It was also open to the
President of the Appellate Tribunal to constitute larger benches
of three Members (subject to the condition, that the larger bench
G would comprise of at least one Judicial Member and one
Accountant Member).
(iv) Section 5A of the 1922 Act, laid down the conditions
of eligibility for appointment as a Judicial Member - a person
who had served on a civil judicial post for 10 years was eligible,
H additionally an Advocate who had been practicing before a
MADRAS BAR ASSOCIATION v. UNION OF INDIA 27
[JAGDISH SINGH KHEHAR, J.]
High Court for a period of 10 years, was also eligible. Under A
the 1922 Act, a person who had practiced in accountancy as
a Chartered Accountant (under the Chartered Accountants Act,
1949) for a period of 10 years, or was a Registered Accountant
(or partly a Registered Accountant, and partly a Chartered
Accountant) for a period of 10 years (under any law formerly B
enforced), was eligible for appointment as an Accountant
Member. Only a Judicial Member could be appointed as the
President of the Appellate Tribunal.
(v) Section 67 of the 1922 Act, barred suits in civil courts
pertaining to income tax related issues. Additionally, any C
prosecution suit or other proceedings could not be filed, against
an officer of the Government, for an act or omission, in
furtherance of anything done in good faith or intended to be
done under the 1922 Act.
D
(vi) The 1922 Act. did not provide for an appellate remedy,
before the jurisdictional High Court. The only involvement of the
jurisdictional High Court, was under Section 66 of the 1922 Act.
Under Section 66, either the assessee or the Commissioner
of Income Tax, could move an application to the Appellate E
Tribunal, requiring it to refer a question of law (arising out of
an assessment order) to the jurisdictional High Court. In case
of refusal to make such a reference, the aggrieved assessee
or the Commissioner of Income Tax, could assail the refusal by
the Appellate Tribunal, before the jurisdictional High Court. A F
case referred to the High Court under Section 66, was to be
heard by a bench of not less than two judges of the High Court
(Section 66A of the 1922 Act - inserted by the Indian Income
Tax (Amendment) Act, 1926). Section 66 of the 1922 Act, was
amended by the Indian Income Tax (Amendment) Act, 1939,
whereby the power to make a reference became determinable G
by the Commissioner of In.come Tax (in place of the Appellate
Tribunal).
(vii) In exercise of the reference jurisdiction, a question of
law, which had arisen in an appeal pending before the H
28 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Appellate Tribunal, had to be determined by the High Court.
After the jurisdictional High Court had answered the reference,
the Appellate Tribunal would dispose of the pending appeal in
consonance with the legal position declared by the High Court.
B 3(i) The 1922 Act was repealed by the Income Tax Act,
1961 (hereinafter referred to as, the Income Tax Act). As in the
repealed enactment, so also under the Income Tax Act, an order
passed by an assessing officer, was assailable through an
executive-appellate remedy. The instant appellate remedy, was
vested with the Deputy Commissioner (Appeals)/
C Commissioner (Appeals). The orders appealable before the
Deputy Commissioner (Appeals) were distinctly mentioned (in
Section 246 of the Income Tax Act). Likewise, the orders
·appealable before the Commissioner (Appeals) were expressly
enumerated (in Section 246A of the Income Tax Act).
D
(ii) As against the order passed by the executive-appellate
authority, a further appellate remedy was provided before a
quasi-judicial appellate tribunal (hereinafter referred to as, the
Appellate Tribunal, under Section 252 of the Income Tax Act).
E Section 255(6) of the Income Tax Act provides as under:-
"6. The Appellate Tribunal shall, for the purpose of
discharging its functions, have all the powers which are
vested in the income-tax authorities referred to in section
131, and any proceeding before the Appellate Tribunal
F
shall be deemed to be a judicial proceeding within the
meaning of sections 193 and 228 and for the purpose of
section 196 of the Indian Penal Code (45 of 1860t and
the Appellate Tribunal shall be deemed to be a civil court
for all the purposes of section 195 and Chapter XXXV of
G the Code of Criminal Procedure. 1898 (5 of 1898)"."
By a deeming fiction of law, therefore, the Appellate
Tribunal was considered as a civil court , dealing with "judicial
proceedings".
H *. Emphasis Supplied in all the quotations in the instant Judgment.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 29
[JAGDISH SINGH KHEHAR, J.]
(iii) To be eligible for appointment as the President of the A
ITAT, the incumbent had to be a sitting or retired judge of a High
Court, with not less than 7 years of service as a judge.
Alternatively, the Central Government could appoint a Senior
Vice President or a Vice President of the Appellate Tribunal,
as its President. It is, therefore apparent, that the Appellate B
Tribunal was to be comprised of a President, Senior Vice
President(s), Vice President(s) and Members.
(iv) The benches of the Appellate Tribunal, under the Income
Tax Act (was similar to the one under the 1922 Act), were to C
be comprised of at least one Judicial Member and one
Accountant Member. The authority to constitute benches of the
Appellate Tribunal was vested with the President. The
composition of the benches under the Income Tax Act, was
similar to that postulated under the 1922 Act. When authorized
by the Central Government, it was open to the Appellate 0
Tribunal, to dispose of appeals sitting singly (subject to the
condition, that the appeal pertained to a dispute, wherein the
concerned assessee's total income was assessed as not
exceeding Rs.5 lakhs). The President of the Appellate Tribunal,
had the authority to constitute special benches, comprising of E
three or more Members (one of whom had to be a Judicial
Member, and one, an Accountant Member). In case of
difference of opinion, the matter was deemed to have been
decided in terms of the opinion expressed by the majority.
F
(v) An assessee or the Commissioner, could move an
application before the Appellate Tribunal, under Section 256 of
the Income Tax Act, requiring it to make a reference to the High
Court on a question of law (arising in an appeal pending before
the Appellate Tribunal). In case the prayer made in the G
application was declined by the Appellate Tribunal, the order
(declining the prayer) was assailable before the High Court.
(vi) Section 257 of the Income Tax Act provided for a
reference directly to the Supreme Court. The instant reference
could be made by the Appellate Tribunal, if it was of the opinion, H
30 SUPREME COURT REPORTS [2014] 10 S.C.R.
A that the question of law which had arisen before it, had been
interpreted differently, by two or more jurisdictional High Courts.
(vii) Section 260A was inserted in the Income Tax Act by
the Finance (No. 2) Act, 1998, with effect from 1.10.1998.
B Under Section 260A, an appellate remedy was provided for,
to raise a challenge to orders passed by the Appellate Tribunal.
The instant appellate remedy, would lie before the jurisdictional
High Court. In terms of the mandate contained in Section 260B
of the Income Tax Act, an appeal before the High Court was to
C be heard by a bench of not less than two judges. The opinion
of the majority, would constitute the decision of the High Court.
Where there was no majority, on the point(s) of difference, the
opinion of one or more judges of the High Court, was to be
sought. Thereupon, the majority opinion of the judges (including
the judges who had originally heard the case) would constitute
D the decision of the High Court.
(viii) A further appellate remedy was available as against
a decision rendered by the jurisdictional High Court. The instant
appellate remedy was vested with the Supreme Court under
E Section 261 of the Income Tax Act.
The Customs Legislation, in India:
4(i). The Customs Act, 1962 (hereinafter referred to as,
the Customs Act) was enacted to consolidate and amend the
F law relating to customs. The Customs Act vested the power of
assessment of customs duty, with the Deputy Collector of
Customs or the Collector of Customs. An executive-appellate
remedy was provided under Section 128 of the Customs Act,
before a Collector of Customs (where the impugned order had
G been passed by an officer, lower in rank to the Collector of
Customs). and before the Central Board of Excise and
Customs (constituted under the Central Boards of Revenue Act,
1963), where the impugned order had been passed by a
Collector of Customs. The Board had also been conferred with
H executive revisional powers (under Section 130 of the Customs
MADRAS BAR ASSOCIATION v. UNION OF INDIA 31
[JAGDISH SINGH KHEHAR, J.]
Act), to suo moto, or on an application of an aggrieved person, A
examine the record of any proceeding, pertaining to a decision
or order under the provisions of the Customs Act. Revisional
powers, besides those expressly vested in the Board (under
Section 130 of the Customs Act), were also vested with the
Central Government (under Section 131 of the Customs Act). B
(ii) By the Finance (No. 2) Act, 1980, Sections 128 to 131
of the original Act were substituted. The power to entertain the
first executive-appellate remedy, was now vested with the
Collector (Appeals), under Sections 128 and 128A of the C
Customs Act. On exhaustion of the above remedy, a further
quasi-judicial appellate remed_y was provided for, under
Sections 129 and 129A before the Customs, Excise and Gold
(Control) Appellate Tribunal (hereinafter referred to as, the
CEGAT/Appellate Tribunal). CEGAT was also the appellate
authority, against orders passed by the Board. With introduction D
of Service Tax, under Chapter V of the Finance Act, 1994,
CEGAT was conferred the jurisdiction to hear appeals in cases
pertaining to service tax disputes as well. The Appellate
Tribunal is now known as the Customs, Excise and Service Tax
Appellate Tribunal - the CESTAT. By Act 22 of 2003, the_ E
expression "Gold (Control)" was substituted with "Service Tax"
in the definition of the "Appellate Tribunal" (w.e.f. 14.5.2003).
(iii) Section 129 of the Customs Act delineated the
constitution of the CEGAT. It was to comprise of as many F
Judicial and Technical Members, as the Central Government
thought fit. The instant provision, also laid down the conditions
of eligibility for appointment of Judicial/Technical Members. A
Judicial Member could be chosen out of persons, who had held
a civil judicial post for at least 10 years, or out of persons who G
had been in practice as an Advocate for at least 10 years, as
also, from out of Members of the Central Legal Service (not
below Grade-I), who had held such post for at least 3 years. A
Technical Member could be appointed out of persons, who had
been members of the Indian Customs and Central Excise
H
32 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Service (Group A), subject to the condition, that such persons
had held the post of Collector of Customs or Central Excise
(Level I), or equivalent or higher post, for at least 3 years. The
Finance (No.2) Act, 1996 amended Section 129(3) of the
Customs Act, whereby it enabled the Central Government to
B appoint a person to be the President of the Appellate Tribunal.
The Central Government could make such appointment, subject
to the condition, that the person concerned had been a judge
of the High Court, or was one of the Members of the Appellate
Tribunal. Likewise, it was open to the Central Government to
c appoint one or more Members of the Appellate Tribunal to be
its Vice President(s).
(iv) Powers and functions of the Appellate Tribunal were
to be exercised through benches constituted by its President,
from amongst Members of the Appellate Tribunal (in terms of
0 Section 129C of the Customs Act). Each bench was required
to be comprised of at least one Judicial Member and one
Technical Member. It was open to the President to constitute a
special bench of not less than three Members (comprising of
at least one Judicial and one Technical Member). The
E composition of the bench, was modified by an amendment
which provided, that a special bench of the Appellate Tribunal
was to consist of not less than two Members (instead of three).
It was also open to the President and/or Members (as
authorized by the President of the Appellate Tribunal) to
F dispose of appeals, sitting singly, subject to the condition, that
the value of goods confiscated, or the difference in duty
involved, or duty involved, or the amount of fine or penalty
involved, did not exceed Rs.10,000/- - the limit was first
revised to Rs.50,000/-, then to Rs.1 lakh, later to Rs.10 lakhs,
G and at present, the same is Rs.50 lakhs. A case involving a
dispute where the determination of any question having a
relation to the rate of duty of customs or to the value of goods
for purposes of assessment is the sole or one of the points in
issue, must however be heard by a bench comprising of a
H Judicial and~ Technical Member [Section 129C(4)(b)]. In case
MADRAS BAR ASSOCIATION v. UNION OF INDIA 33
[JAGDISH SINGH KHEHAR, J.]
of difference of opinion on any point(s), the opinion of the A
majority was to constitute the decision of the Appellate Tribunal.
If Members were equally divided, the appeal was to be referred
by the President, for hearing on such point(s), by one or more
other Members of the Appellate Tribunal. Whereupon, the
majority opinion was to be considered as the decision of the B
Appellate Tribunal. Sub-sections (7) and (8) of Section 129C
provided as under:-
"(7) The Appellate Tribunal shall, for the purposes of
discharging its functions, have the same powers as are C
vested in a court under the Code of Civil Procedure, 1908
(5 of 1908), when trying a suit in respect of the following
matters, namely:-
(a) discovery and inspection;
D
(b) enforcing the attendance of any person and
examining him on oath;
(c) compelling the production of books of account and
other documents; and
E
(d) issuing commissions.
(8) Any proceeding before the Appellate Tribunal shall be
deemed to be a judicial proceeding within the meaning of
Sections 193 and 228 and for the purpose of Section 196 F
of the Indian Penal Code 945 of 1860) and the Appellate
Tribunal shall be deemed to be a Civil Court for all the
purposes of Section 195 and Chapter XX.VI of the Code
of Criminal Procedure, 1973 (2 of 1974)."
It is apparent from the above provision, that by a fiction of G
law, proceedings before the Appellate Tribunal are treated as
judicial proceedings.
(v) The Customs and Excise Revenues Appellate Tribunal
Act, 1986 came into force with effect from 23.12.1986. Section H
34 SUPREME COURT REPORTS (2014] 10 S.C.R.
A 26 of the instant enactment, excluded the jurisdiction of courts
except the Supreme Court. Section 28 thereof provided as
under:-
"28. Proceedings before the Appellate Tribunal to be
B judicial proceedings - All proceedings before the
Appellate Tribunal shall be deemed to be judicial
proceedings within the meaning of Sections 193, 219 and
228 of the Indian Penal Code (45 of 1860)."
A perusal of the above amendment reveals, that by a fiction of
C law, the Appellate Tribunal was deemed to be discharging
"judicial proceedings". Therefore, the position prevailing prior
to the amendment, was maintained, so far as the instant aspect
was concerned.
D (vi) Just as in the case of the 1922 Act, which did not
provide for an appellate remedy, but allowed a reference to be
made to a jurisdictional High Court, under Section 66, likewise,
Section 130 of the Customs Act provided for a reference on a
question of law, to the High Court. A reference could be made,
E on an application by the Collector of Customs or the person on
whom customs duty has been levied, to the Appellate Tribunal.
If the Appellate Tribunal refused to make a reference, the
aggrieved party could assail the determination of the Appellate
Tribunal, before the jurisdictional High Court. Where a reference
F on a question of law was entertained, it had to be heard by a
bench of not less than two judges of the High Court. In case of
difference of opinion on any point(s), the opinion expressed by
the majority, was to be treated as the decision of the High Court.
Where the opinion was equally divided, on the point(s) of
difference, the matter was to be heard by one or more other
G judges of the High Court. Thereupon, the majority opinion of the
judges (including the judges who had originally heard the case)
would constitute the decision of the High Court. A decision of
the High Court, would then be applied by the Appellate Tribunal,
for the disposal of the appeal wherefrom the reference had
H arisen.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 35
[JAGDISH SINGH KHEHAR, J.]
(vii) The Appellate Tribunal was also authorized to make A
a reference directly to the Supreme Court (under Section 130A
of the Customs Act). This could be done, in case the Appellate
Tribunal was of the view, that there was a conflict of decisions
of High Courts in respect of a question of law pending before
it for decision. The decision of the Supreme Court, would then B
be applied by the Appellate Tribunal, for the disposal of the
appeal out of which the reference had arisen.
(viii) The Finance (No. 32) Act, 2003 introduced a new
Section 130. The remedy of a reference to the jurisdictional
High Court, was substituted by a remedy of an appeal to the C
High Court. The amended Section 130 of the Customs Act
provided, that an appeal would lie to the High Court from every
order passed by the Appellate Tribunal (on or after 1.7.2003),
subject to the condition, that the High Court was satisfied, that
the case involved a substantial question of law. In such .an D
eventuality, the High Court would formulate the substantial
question(s) of law. It was open to the High Court in exercise of
its instant appellate jurisdiction, also to determine any issue
which had not been decided by the Appellate Tribunal, or had
been wrongly decided by the Appellate Tribunal. The appeal E
preferred before the High Court, could be heard by a bench of
not less than two judges.
(ix) After amendment to Section 130, Section 130E was
also amended. The latter amended provision, provided for an
F
appeal to the Supreme Court, from a judgment of the High
Court, delivered on an appeal filed under Section 130, or on a
reference made under Section 130 by the Appellate Tribunal
(before 1.7.2003), or on a reference made under Section 130A.
(x) The NTT Act omitted Sections 130, 130A, 1308, 130C G
and 1300 of the Customs Act. The instant enactment provided
for an appeal from every order passed by the Appellate Tribunal
to the NTT, subject to the condition, that the NTT arrived at the
satisfaction, that the case involved a substantial question of law.
·On admission of an appeal, the NTT would formulate the H
36 SUPREME COURT REPORTS [2014] 10 S.C.R.
A substantial question of law for hearing the appeal. Section 23
of the NTT Act provided, that on and from the date, to be
notified by the Central Government, all matters and proceedings
including appeals and references, pertaining to direct/indirect
taxes, pending before the High Court, would stand transferred
B to the NTT. Section 24 of the NTT Act provides for an appeal
from an order passed by the NTT, directly to the Supreme
Court.
The Central Excise Legislation. in India:
C 5(i). The Central Excise and Salt Act, 1944 (hereinafter
referred to as, the Excise Act) was enacted to consolidate and
amend, the law related to central duties on excise, and goods
manufactured and produced in India, and to salt. Under the said
enactment, the power to assess the duty, was vested with the
D Assistant. Collectors of Central Excise, and Collectors of Central
Excise. An executive-appellate remedy was provided for under
Section 35 before the Commissioner (Appeals).
(ii) The Board was vested with revisional jurisdiction.
E Revisional jurisdiction was additionally vested with the Central
Government. In 1972, the Board was empowered under
Section. 35A of the Excise Act, to exercise the power of
revision, from a decision/order/rule made/passed, under the
Excise Act, subject to the condition, that no revision would lie
under the instant provision, as against an appellate order
F passed under Section 35 of the Excise Act, by the
Commissioner (Appeals). The Central Government was vested
with revisional jurisdiction against appellate orders passed by
the Commissioner (Appeals) under Section 35. In 1978, the
revisional jurisdiction which hitherto before lay with the Board,
G was vested with the Collector of Central Excise.
(iii) On the exhaustion of the first executive-appellate
remedy, a further quasi-judicial appellate remedy was provided
for, under Section 35B of the Excise Act, to an Appellate
H Tribunal. The remedy of appeal before the Appellate Tribunal,
MADRAS BAR ASSOCIATION v. UNION OF INDIA 37
[JAGDISH SINGH KHEHAR, J.]
could be avatleff of (a) against a decision or order passed by A
the Collector of Central Excise as an adjudicating authority, (b)
against an order passed by the Collector (Appeals) under
Section 35A of the Excise Act (as substituted by the Finance
(No. 2) Act, 1980), (c) against an order passed by the Board
or the Appellate Collector of Central Excise under Section 35 B
(as it stood before 21.8.1980), and (d) against an order passed
by the Board or the Collector of Central Excise under Section
35A (as it stood before 21.8.1980).
(iv) The Appellate Tribunal was to be comprised of such C
number of Judicial/Technical Members as the Central
Government would think fit. Appointment of Judicial Members
could only be made from amongst persons who had held a
judicial office in India for at least 10 years, or who had been
practicing as an Advocate for at least 10 years, or who had
been a member of the Indian Legal Service (having held a post D
in Grade I of the said service, or any equivalent or higher post)
for at least 3 years. Only such persons could be appointed as
Technical Members who had been, members of the Indian
Customs and Central Excise Service, Group A, and had held
the post of Collector of Customs or Central Excise (or any E
equivalent or higher post) for at least 3 years. The Central
Government had the power to appoint a person, who was or
had been a judge of a High Court, or who was one of the
. Members of the Appellate Tribunal, as the President of the
Appellate Tribunal. The functions of the Appellate Tribunal were F
to be discharged through benches constituted by its President.
The Central Government also had the authority to appoint one
or more Members of the Appellate Tribunal as Vice-
President(s). Each bench was to consist of at least one Judicial
Member and one Technical Member. In case of difference of G
opinion on any point(s), the opinion of the majority would
constitute the decision of the Appellate Tribunal. If the Members
of the bench were equally divided, the President was required
to refer the disputed opinion for hearing, on the point(s) of
difference, by one or more other Members of the Appellate H
38 SUPREME COURT REPORTS [2014) 10 S.C.R.
A Tribunal. The majority opinion after such reference, would be
the decision of the Appellate Tribunal. It was also permissible
for the President, and the Members (authorized by the
President) of the Appellate Tribunal, to hear and dispose of
appeals, sitting singly (subject to the condition, that the
B difference in duty or the duty involved, or the amount of fine or
penalty i.nvolved, did not exceed Rs.10,000/- - the limit was
first revised to Rs.50,000/-, then to Rs.1 lakh, later to Rs.10
lakhs, and at present, the same is Rs.50 lakhs). Similar
provision (as in respect of appeals to the Appellate Tribunal
c under Customs Act) with regard to matters to be heard by a
division bench, is enjoined in Section 350(3)(a) of the Excise
Act.
(v) The Customs and Excise Revenues Appellate Tribunals
Act, 1986, came into force on 23.12.1986. Section 26 of the
D instant enactment excluded the jurisdiction of courts except the
Supreme Court. Section 14, provided for jurisdiction, powers
and authority of the Appellate Tribunal. Section 28 provided as
under:-
E "28. Proceedings before the Appellate Tribunal to be
judicial proceedings - All proceedings before the
Appellate Tribunal shall be deemed to-be judicial
proceedings within the meaning of Sections 193, 219 and
228 of the Indian Penal Code (45 of 1860)."
F A perusal of the above amendment reveals, that by a
fiction of law, the Appellate Tribunal was deemed to be
discharging "judicial proceedings".
(vi) Section 35G provided for a reference on any question
G of law,· by the Appellate Tribunal, to the High Court. The
aforesaid remedy could be availed of by filing an application
before the Appellate Tribunal. Such an application could be filed
by either the Collector of Central Excise, or the person on whom
the excise duty was levied. A reference, on a question of law,
H made by the Appellate Tribunal, to the High Court, would be
MADRAS BAR ASSOCIATION v. UNION OF INDIA 39
[JAGDISH SINGH KHEHAR, J.]
heard by a bench of not less than two judges. On the Appellate A
Tribunal's refusal to refer a question of law, the aggrieved party
could assail the decision of the Appellate Tribunal (declining
to make a reference), before the High Court. The jurisdictional
High Court, on the acceptance of a reference, would render its
decision, on the question of law. In case of difference of opinion, B
the opinion expressed by the majority would constitute the
decision of the High Court. If the opinion by the bench was
equally divided, the point(s) of difference were to be heard by
one or more other judges of the High Court, whereafter, the
opinion expressed by the majority would be treated as the c
decision of the High Court. The Appellate Tribunal would
thereupon, decide the pending appeal, in consonance with the
decision rendered by the High Court.
(vii) Section 35H of the Excise Act provided for a
reference, by the Appellate Tribunal, directly to the Supreme D
Court. The instant reference by the Appellate Tribunal, could be
made after the Appellate Tribunal had arrived at the conclusion,
that the question of law arising for adjudication iri an appeal
pending, before it, was differently interpreted by 'two or more
jurisdictional High Courts. The decision of the Supreme Court, E
would then be applied by the Appellate Tribunal, to decide the
pending appeal. Section 35L provided for appeal to the
Supreme Court against the judgment rendered by the High
Court (upon a reference made to the High Court by the Appellate
Tribunal). The decision of the Supreme Court would then be F
applied by the Appellate Tribunal, in the disposal of the appeal
pending before it.
(viii) The Finance (No. 32) Act, 2003 substituted Section
35G of the Excise Act and in place of the remedy of reference, G
the amended provision provided for a direct appeal to the
jurisdictional High Court (after the cut-off date, i.e., 1.7.2003).
The jurisdictional High Court was to entertain an appeal from
an order passed by the Appellate Tribunal, on its being
satisfied, that the appeal raised a substantial question of law.
H
40 SUPREME COURT REPORTS [2014] 10 S.C.R.
A In such an eventuality, the High Court would~formulate the
substantial question(s) of law. It was open to tl:ie High Court in
exercis~ of its instant appellate jurisdiction, also to determine
any issue which had not been decided by the Appellate Tribunal,
or had wrongly been decided by the Appellate Tribunal. The
B appeal preferred before the High Court, would be heard by a
bench of not less than two judges. Section 35L of the Excise
Act was also amended. The amended provision provided for
an appeal from any judgment of the High Court (in exercise of
its appellate jurisdiction under Section 35G of the Excise Act,
c or on a reference made under Section 35G by the Appellate
Tribunal before 1.7.2003, or on a reference made under Section
35H), to the Supreme Court.
(ix) The NTT Act omitted Sections 35G, 35H, 351 and 35J
of the Excise Act. The instant enactment provided for an appeal
D from every order passed by the Appellate Tribunal to the NTT,
subject to the condition, that the NTT was sati_sfied, that the
case involved a substantial question of law. On admission of
an appeal, the NTT would formulate the substantial question of
law, for hearing the appeal. S~dtion 23 of the NTT Act provided,
E that on and from the date to be notified by the Central
Government, all matters and proceedings including appeals
and references, pertaining to direct/indirect taxes, pending
before the jurisdictional High Courts, would stand transferred
to the NTT. Section 24 of the NTT Act provided for an appeal
F from an o~'"'<:!r passed by the NTT, to the Supreme Court.
Facts leading to the promulgation of the NTT Act:
6. The first Law Commission of independent India was
established in 1955 for a three year term under the
G chairmanship of Mr. M.C. Setalvad, who was also the first
Attorney General for India. The idea of constituting a "National
Tax Court" was mooted by the first Law Commission in its 12th
Report, suggesting the abolition of the existing appellate
tribunal, under the framework of the Income Tax Act. It
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 41
[JAGDISH SINGH KHEHAR, J.]
recommended a direc(appeal to the High Courts, from orders A
passed by appellate Commissioners. This recommendation
was not accepted.
7. A Direct Taxes Enquiry Committee was set up by the
Government of India in 1970, with Mr. K.N. Wanchoo a retired !?-
Chief Justice of the Supreme Court of India\ as its Chairman.
The Enquiry Committee was assigned the fdllowing objectives:
(1) to recommend ways to check avoidance of tax, through
various legal lacunae; (2) to examine the exemptions allowed
by tax laws, and evaluate scope of their reduction; and (3) to C
suggest methods for better tax assessment, and improvements
in tax administration. The Wanchoo Committee recommended
creation of a "National Court", which would be comprised of
judges with special knowledge of tax laws. The
recommendation made by the Wanchoo Committee, was for
creation of permanent 'Tax Benches" in High Courts, and D
appointment of retired judges to such benches, under Article
224A of the Constitution. The suggestion was aimed at clearing
the backlog of tax cases. The Wanchoo Committee did not
suggest the establishment of any separate tax courts as that,
according to the Committee, would involve an amendment to E
the provisions of the Constitution, besides other statutory and
procedural changes.
8. Another Direct Tax Laws Committee was constituted in
1977, under the chairmanship of Mr. N.K. Palkhivala, an F
eminent jurist. The Committee was later headed by Mr. G.C.
Choksi. The Committee was constituted, to examine and
suggest legal and administrative measures, for simplification
and rationalization of direct tax laws. The Choksi Committee
recommended the establishment of a "Central Tax Court" with G
an all-India jurisdiction. It was suggested, that such a court be
constituted under a separate statute. Just like:: the
recommendations of the Wanchoo Committee, the
recommendations of the Choksi Committee also necessitated
amendments in the provisions of the Constitution. As an interim
H
42. SUPREME COUR"i REPORTS [2014] 10 S.C.R.
A measure to the above recommendation, the Choksi Committee
suggested, the''desi'rability of constituting "Special Tax
Benches" in High Courts, to deal with the large number of
pending tax case's, by continuous sitting throughout the year. It
was also suggested, that judges who sit on the "Special Tax
B Benches'', should be selected from those who had special
knowledge, to deal with matters relating to direct tax laws.. The
Choksi Committee recommended, that the judges selected for
the "Special Tax Benches" would be transferred to the "Central
Tax Court", as and when the same was constituted. It is,
c therefore apparent, that according to the recommendations of
the Choksi Committee, the "Central Tax Court" was to comprise
of judges of High Courts, or persons qualified to be appointed
as High Court Judges. The recommendations of the Choksi
Committee reveal, that the suggested "Central Tax Court" would
· be a special kind of High Court, to deal with issues pertaining
0
to direct tax laws. This was sought to be clarified in paragraph
6.22 of the Choksi Committee's Report.
9. None of the recommendations referred to hereinabove
were implemented, till a similar recommendation was again
·E mooted in the early 1990s. After deliberating on the issue for
a few years, the Union of India promulgated the National Tax
Tribunal Ordinance, 2003. The Ordinance inter alia provided,
for the transfer of appellate jurisdiction (under direct tax laws)
vested in High Courts, to the NTI. After the Ordinance lapsed,
F the National Tax Tribunal Bill, 2004 was introduced. The said
Bill was referred to a Select Committee of the Parliament. The
Select Committee granted a personal hearing to a variety of
stakeholders, including the representatives of the Madras Bar
Association (i.e., the petitioner before this Court in Transferred
G Case (C) no. 150 of 2006). The Committee presented its report
on 2.8.2005. In its report, it suggested serious reservations on
the setting up of the NTI. The above Bill was presented before
the Lok Sabha in 2005. The Bill expressed four main reasons
for setting up the NTT: (1) to reduce pendency of huge arrears,
H that had mounted in High Courts all over the country, (2) huge
MADRAS BAR ASSOCIATION v. UNION OF INDIA 43
[JAGDISH SINGH KHEHAR, J.]
tax recovery was statedly held up, in tax litigation before various A
High Courts, which directly impacted implementation of national
projects/welfare schemes of the Government of India, (3) to
have a uniformity in the interpretation of tax laws. In this behalf
·it was suggested, that different opinions were expressed by
different High Courts on identical tax issues, resulting in the B
litigation process being tied up in higher Courts, and (4) the
existing judges dealing with tax cases, were from civil courts,
and therefore, were not well-versed to decide complicated tax
issues.
The issues canvassed on behalf of the petitioners:
c
10. The submissions advanced on behalf of the petitioners,
for purposes of convenience, deserve to be examined from a
series of distinct and separate perspectives. Each perspective
is truly an independent submission. It is, therefore necessary, D
in the first instance, to clearly describe the different
submissions, advanced at the hands of the learned counsel for
the petitioners. The same are accordingly being delineated
hereunder:-
E
The first contention: That the reasons for setting up the NTT,
were fallacious and non-existent. Since the foundational basis
is untrue, the structure erected thereupon, cannot be accepted
as valid and justified. And therefore, the same is liable to be
struck down.
F
The second contention: It is impermissible for the
legislature to abrogate/divest the core judicial appellate
functions, specially the functions traditionally vested with the
High Court. Furthermore, the transfer of such functions to a
quasi-judicial authority, devoid of essential ingredients of the G
superior court, sought to be replaced was constitutionally
impermissible, and was liable to be set aside. Besides the
appellate jurisdiction, the power of judicial review vested in High
Courts under Articles 226 and 227 of the Constitution, has also
H
/
,44 SUPREME COURT REPORTS [2014] 10 S.C.R.
A been negated by the NTT Act. And therefore, the same be set
aside.
The third contention: Separation of powers, the rule of law,
and judicial review, constitute amongst others, the basic
B structure of the Constitution. Article 323B inserted by the
Constitution (Forty-second Amendment) Act, 1976, to the
extent it is violative of the above mentioned components of the
basic structure of the Constitution, is liable to be declared ultra
vires the Constitution.
C The fourth contention: A number of provisions including
Sections 5, 6, 7, 8 and 13 of the NTT Act, undermine the
independence of the adjudicatory process vested in the NTT,
and as such, are liable to be set aside in their present format.
D 11. We shall now narrate each of the above contentions
advanced by the learned counsel for the petitioners, in the
manner submissions were advanced before us.
The first contention:
E 12. As regards arrears of tax related cases before High
Courts is concerned, it was submitted, that the figures indicated
by the Department were incorrect. In this behalf it was asserted,
that the stance adopted at the behest of the Revenue, that there
were about 80,000 cases pending in different courts, was
F untrue. It was the emphatic contention of the learned counsel
for the petitioners, that as of October, 2003 (when the National
Tax Tribunal Ordinance, was promulgated), the arrears were
approximately 29,000. Of the total pendency, a substantial
number was only before a few High Courts, including the High
G <;;ourt of Bombay and the High Court of Delhi. In the petition
filed by the Madras Bar Association, it was asserted, that in
the Madras High Court, the pending appeals under Section
260A of the Income Tax Act, were less than 2,000. It was also
sought to be asserted, that the pendency of similar appeals in
H most southern States was even lesser. It was pointed out, that
MADRAS BAR ASSOCIATION v. UNION OF INDIA 45
[JAGDISH SINGH KHEHAR, J.]
the pendency of such appeals in the High Court of Karnataka A
and the High Court of Kerala, was even lesser than 2,000.
13. In respect of the Revenue's assertion, that huge tax
recovery was held up, in tax litigation, before High Courts, it was
submitted, that the figures projected at the behest of the 8
Department were incorrect. It was pointed out, that according
to the Revenue, the pending cases in the High Courts involved
an amount of approximately Rs.80,000 crores (relatable to
direct tax cases). It was submitted, that the figures projected
by the Department, included not only the basic tax, but interest C
and penalty imposed thereon, as well. It was pointed out, that
interest could be as high as 40% per annum, under tax statutes,
besides penal interest. It was accordingly sought to be
canvassed, that if the main appeals were set aside by the High
Court, there would hardly be any dues payable to the
Government at all. Additionally, it was sought to be asserted, D
that many tax appeals pending before the High Courts, were
filed by assessees, and accordingly, in the event of the
assessees succeeding, the amount could not be considered
as having been held up, but may have to be refunded. It was
further asserted, that in most cases, the Revenue was able to E
recover a substantial amount from the assessees, by the time
. the matter reached the High Court (on account of pre-deposits).
It was, therefore sought to be submitted, that the figures
indicated by the Revenue, with reference to the amount of tax
held up in pending cases, before High Courts was wholly flawed F
and deceptive.
14. It was also the contention of the learned counsel for
the petitioners, that the mere establishment and creation of the
NTT, would not result in uniformity of decisions pertaining to tax G
laws. In this behalf it was sought to be asserted, that just as in
the manner two High Courts could differ with one another, so
also, could two tax benches, of the NTT. On the factual front, it
was pointed out, that divergence of opinion in High Courts was
very rare. It was, as a matter of approximation, suggested, that
H
46 SUPREME COURT REPORTS [2014] 10 S.C.R.
A in most cases (approximately 99%), one High Court would
follow the view taken by another High Court. Learned counsel,
however pointed out, that in High Courts an age-old mechanism,
to resolve conflicts of views, by either placing such matters
before larger benches, or before a higher court, was in place.
B Pointing out illustratively to the ITAT and the CESTAT, it was
asserted, that there had been many cases of divergence of
opinion, which were resolved by larger benches. It was,
therefore sought to be canvassed, that the instant basis for
constituting the NTT, was also not based on a prudent or
c sensible rationale.
15. On the subject of High Court Judges being not well-
versed to determine complicated interpretation of tax-law
related issues, it was submitted, that the very mention of the
above as a basis, for creating the NTT, was extremely
D unfortunate. It was submitted, that well before the independence
of this country, and even thereafter, High Courts have been
interpreting and construing tax related disputes, in a legitimate,
tenable and lawful manner. The fairness and rationale of tax
related issues, according to learned counsel, was apparent
E from the faith reposed in High Courts both by the Revenue, as
well as, by the assessees. Furthermore, the veracity and
truthfulness, of the instant assertion, according to the learned
counsel, could be gauged from the fact, that interference by the
Supreme Court, in the orders passed by the High Courts on
F tax matters, has been minimal.
16. During the course of hearing, our attention was also
invited to the fact, that the legislations of the instant nature
would have a lopsided effect. In this behalf it was sought to be
G pointed out, that while jurisdiction vested in High Courts was
being excluded, the burden was being transferred to the
Supreme Court of India. This assertion was sought to be
substantiated by the learned counsel for the petitioners, by
inviting our attention to the legislations, wherein the power of
H judicial review traditionally vested in the High Courts, has been
MADRAS BAR ASSOCIATION v. UNION OF INDIA 47
[JAGDISH SINGH KHEHAR, J.]
excluded, and a remedy of appeal has been provided from the A
tribunals constituted directly to the Supreme Court. In this
behalf, reference may illustratively be made to the following
provisions:-
(i) The Electricity Act, 2003
B
125. Appeal to Supreme Court - Any person
aggrieved by any decision or order of the Appellate
Tribunal, may, file an appeal to the Supreme Court
within sixty days from the date of communication of
the decision or order of the Appellate Tribunal to c
him, on any one or more of the grounds specified
in Section 100 of the Code of Civil Procedure,
1908 (5 of 1908):
Provided that the Supreme Court may, if it is D
satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said
period, allow it to be filed within a further period not
exceeding sixty days.
(ii) The National Green Tribunal Act, 2010 E
Section 22. Appeal to Supreme Court -Any person
aggrieved by any award, decision or order of the
tribunal, may, file an appeal to the Supreme Court,
within ninety days from the date of communication F
of the award, decision or order of Tribunal, to him,
on any one or more of the grounds specified in
Section 100 of the Code of Civil Procedure, 1908
(5 of 1908)
Provided that the Supreme Court may, entertain any G
appeal after the expiry of ninety days, if it is satisfied
that the appellant was prevented by sufficient cause
from preferring the appeal.
(iii) The Telecom Regulatory Authority of India Act, 1997 H
48 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Section 18. Appeal to Supreme Court - (1)
Notwithstanding anything contained in the Code of
Civil Procedure, 1908 (5 of 1908) or in any other
law, an appeal shall lie against any order, not being
an interlocutory order, of the Appellate Tribunal to
B the Supreme Court on one or more of the grounds
specified in section 100 of that code.
(2) No appeal shall lie against any decision or order
made by the Appellate Tribunal with the consent of
the parties.
c
(3) Every appeal under this section shall be
preferred within a period of ninety days from the
date of the decision or order appealed against:
D Provided that the Supreme Court may entertain the
appeal after the expiry of the said period of ninety
days, if it is satisfied that the appellant was
prevented by sufficient cause from preferring the
appeal in time.
E (iv) The Securities and Exchange Board of India Act,
.,1992
Section 15Z. Appeal to Supreme Court. - Any
person aggrieved by any decision or order of the
F Securities Appellate Tribunal may file an appeal to
the Supreme Court within sixty days from the date
of communication of the decision or order of the
Securities Appellate Tribunal to him on any question
of law arising out to such order:
G Provided that the Supreme Court may, if it is
satisfied that the applicant was prevented by
sufficient cause from filing the appeal within the said
period, allow it to be filed within a further period not
exceeding sixty days.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 49
[JAGDISH SINGH KHEHAR, J.]
(v) Companies Act, 1956 A
Section 1OGF. Appeal to Supreme Court. - Any
person aggrieved by any decision or order of the
Appellate Tribunal may file an appeal to the
Supreme Court within sixty days from the date of B
communication of the decision or order of the
Appellate Tribunal to him on any question of law
arising out of such decision or order:
Provided that the Supreme Court may, if it is
satisfied that the appellant was prevented by C
sufficient cause from filing the appeal within the
said period, allow it to be filed within a further
period not exceeding sixty days.
17. It was also pointed out, that the enactment of the NTT o
Act per se lacks bonafides. In this behalf the contention of the
learned counsel for the petitioner was, that there is a
Parliamentary convention that if a Select Committee rejects a
Bill, it is normally not passed by the Parliament. At the very
least, the reservations expressed by the Select Committee are E
taken into account, and the Bill in question is appropriately
modified. It was submitted, that the bill under reference was
presented before the Lok Sabha on 29.11.2005, and the same
was passed without making a single amendment.
18. It was, therefore, the vehement contention of the F
learned counsel for the petitioners, that the foundational facts
being incorrect, and the manner in which the bill was passed,
being devoid of bonafides, the legislation itself i.e., the NTI
Act, deserved to be set aside.
G
The second contention:
19. It was the emphatic contention of the learned counsel
for the petitioners, that it was impermissible for the legislature
to abrogate/divest the core judicial appellate functions
H
50 SUPREME COURT REPORTS [2014) 10 S.C.R.
A 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 transferred).
In conjunctioR with the instant contention, it was also the
s submission of the learned counsel, that the jurisdiction vested
in the High Courts under 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, cannot be curtailed under any
c circumstances.
20~ In order to supplement the instant contention, learned
counsel also placed reliance on Article 225 of the Constitution
which is being extracted hereunder:-
D "225. Jurisdiction of existing High Courts - Subject to the
provisions of this Constitution and to the provisions of any
law of the appropriate Legislature made by virtue of
powers conferred on that Legislature by this Constitution,
the jurisdictiori-of, anti the law administered in, any existing
E High Court, and the respective powers of the Judges
thereof in relation to the administration of justice in the
Court, including any power to make rules of Court and to
regulate the sittings of the court and of members thereof
sitting alone or in Division Courts, shall be the same as
immediately before the commencement of this
F
Constitution:
Provided that any restriction to which the exercise of
original jurisdiction by any of the High Courts with respect
to any matter concerning the revenue or concerning any
G act ordered or done in the collection thereof was subject
immediately before the commencement of this Constitution
shall no longer apply to the exercise ofsuch jurisdiction."
Inviting the Court's attention to the proviso to Article 225 of the
H Constitution it was submitted, that the original jurisdiction of
MADRAS BAR ASSOCIATION v. UNION OF INDIA 51
[JAGDISH SINGH KHEHAR, J.]
High Courts on matters pertaining to revem,1e or the collection A
thereof, even if considered as barred, the said bar was ordered
to be expressly done away with, by the proviso to Article 225
of the Constitution. In the present context, learned counsel for
the petitioners invited our attention to Section 226(1) of the
Government of India Act, 1935. The said Section is reproduced B
hereunder:-
"226(1) Until otherwise provided by Act of the appropriate
Legislature, no High Court shall have any original
Jurisdiction. in any matter concerning the revenue, or
concerning any act ordered or done in the collection C
thereof according to the usage and practice of the country
or the law for the time being in force."
It was submitted, that under the above statutory provision, a
High Court could not issue a writ in the nature of mandamus, D
to call upon a Revenue authority to discharge its statutory
obligations, in respect of the assessment of tax. Likewise, it
was not open to the High Court, to issue a writ in the nature of
certiorari or certiorarified mandamus, in order to set aside or
modify an order of assessment, passed in violation of or in E
contravention of any statutory provision(s). It was submitted, that
the proviso to Article 225 of the Constitution, as has been ·
extracted hereinabove, was omitted by the Constitution (Forty-
second Amendment) Act, 1976 (with effect from 1.2.1977). It
was, however pointed out, that the Parliament having realized
F
its mistake, restored the proviso to Article 225 of the
Constitution, as was originally enacted by the Constitution
(Forty-fourth Amendment) Act, 1978 (with effect from
20.6.1979). Thus viewed, according to the learned counsel for
the petitioners, under the provisions of the Constitution, '
prevailing at the present juncture, the original jurisdiction of the G
High Court (i.e., the jurisdiction under Articles 226 and 227 of
the Constitution), as also, the law administered by a High Court
at the time of enactment of the Constitution, cannot be
restricted. Accordingly, it was asserted, that on matters
H
52 SUPREME COURT REPORTS [2014] 10 S.C.R.
A pertaining to revenue or the collection thereof, the adjudication
authority of High Courts, could not be curtailed.
21. Articles 226 and 227 of the Constitution, on which
emphatic reliance has been placed by the learned counsel, are
being reproduced hereunder:-
8
"226. Power of High Courts to issue certain writs -
(1) Not.vithstanding anything in article 32, every High Court
shall have power, throughout the territories in relation to
c which it exercises jurisdiction, to issue to any person or
authority, including in appropriate cases, any Government,
within those territories directions, orders or writs, including
writs in the nature of habeas corpus, mandamus,
prohibition, quo warranto and certiorari, or any of them, for
D the enforcement of any of the rights conferred by Part Ill
and for any other purpose.
(2) The power conferred by clause (1) to issue directions,
orders or writs to any Government, authority or person may
also be exercised by any High Court exercising jurisdiction
E in relation to the territories within which the cause of action,
wholly or in part, arises for the exercise of such power,
notwithstanding that the seat of such Government or
authority or the residence of such person is not within those
territories.
F
(3) Where any party against whom an interim order,
whether by way of injunction or stay or in any other manner,
is made on, or in any proceedings relating to, a petition
under clause (1 }, without -
G (a) furnishing to such party copies of such petition
and all documents in support of the plea for such
interim order; and
(b} giving such party an opportunity of being heard,
H makes an application to the High Court for the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 53
[JAGDISH SINGH KHEHAR, J.]
vacation of such order and furnishes a copy of such A
application to the party in whose favour such order
has been made or the counsel of such party, the
High Court shall dispose of the application within
a period of two weeks from the date on which it is
received or from the date on which the copy of such B
application is so furnished, whichever is later, or
where the High Court is closed on the last day oJ
that period, before the expiry of the next day
afterwards on which the High Court is open; and if
the application is not so disposed of, the interim c
order shall, on the expiry of that period, or, as the
case may be, the expiry of the aid next day, stand
vacated.
(4) The power conferred on a High Court by this article.shall
not be in derogation of the power conferred on the D
Supreme Court by clause (2) of Article 32.
227. Power of superintendence over all courts by the High
Court -
E
(1) Every High Court shall have superintendence over all
courts and tribunals throughout the territories in relation to
which it exercises jurisdiction.
(2) Without prejudice to the generality of the foregoing
provisions, the High Court may - F
(a) call for returns from such courts;
(b) make and issue general rules and prescribe
forms for regulating the practice and proceedings G
of such courts; and
(c) prescribe forms in which books, entries and
accounts shall be kept qy the officers of any such
courts.
H
54 SUPREME COURT REPORTS [2014) 10 S.C.R.
A (3) The High Court may also settle tables of fees to be
allowed to the sheriff and all clerks and officers of such
courts and to attorneys, advocates and pleaders practising
therein:
Provided that any rules made, forms prescribed or
B
tables settled under clause (2) or clause (3) shall not be
inconsistent with the provision of any law for the time being
in force, and shall require the previous approval of the
Governor.
c (4) Nothing in this article shall be deemed to confer on a
High Court powers of superintendence over any court or
tribunal constituted by or under any law relating to the
Armed Forces."
o It was submitted, that the above original jurisdiction vested in
the High Court to issue prerogative writs, has been shown to
have been consciously preserved, for matters pertaining to levy
and collection of tax. It was also submitted, that the enactment
of the NTT Act has the clear and explicit effect, of excluding the
E jurisdiction of the High Courts. This was sought to be explained
by indicating, that the jurisdiction to adjudicate appeals,
traditionally determined by jurisdictional High Courts, from
orders passed by Appellate Tribunals under the Income Tax Act,
the Customs Act and the Excise Act (all taxing legislations) have
been taken out of the purview of the High Courts, and have been
F vested with the NTT, by the NTT Act. It was further submitted,
that even the jurisdiction vested in High Courts under Articles
226 and 227 of the Constitution, has been practically done away
with. In this behalf the explanation was, that by providing for an
appellate remedy against an order passed by the NTT, directly
G to the Supreme Court, the above original jurisdiction of the High
Courts, had practically been frustrated and effectively
neutralized. It is pointed out, that the curtailment of the
jurisdiction of the High Courts under Articles 226 and 227 of
the Constitution, must be viewed as submission, distinct and
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 55
[JAGDISH SINGH KHEHAR, J.]
separate from the one emerging out of the substitution of, the A
jurisdiction of the High Courts under Section 260A of the
Income Tax Act, 1961, Section 130 of the Customs Act, and
Section 35G of the Excise Act. Whilst the former contention is
based on a clear constitutional right, the submission based on
the provisions of the taxing statutes, emerges from a well B
accepted constitutional convention, coupled with the clear intent
expressed in the proviso to Article 225 of the Constitution.
22: In order to support the second contention advanced by
the petitioners, the following decisions were relied upon:
c
(i) Reliance was first of all, placed on the decision of the.
Privy Council in Hinds v. The Queen Director of Public
Prosecutions v. Jackson Attorney General of Jamaica
(Intervener), 1976 All ER Vol. (1) 353. The factual/legal position
which arose for determination in the cited case pertained to the D
Gun Court Act, 1974, enacted by the Parliament of Jamaica.
The aforesaid enactment was made, without following the
special procedure prescribed by Section 49 of the Constitution
of Jamaica (to alter the provisions of the Constitution of
Jamaica). The Gun Court Act, 1974, had the effect::;! ·~reating E
a new Court- "the Gun Court", to sit in !'.1ree different kinds of
divisions: A Resident Magistrate's Division, a Full Court
Division and a Circuit Court Division. One or the other of these
divisions, was conferred with the jurisdiction to try, different
categories of offenders of criminal offences. Prior to the passing F
of the Act, and at the date of coming into force of the
Constitution, these offences were cognizable only before a
Resident Magistrate's Court, or before the Circuit Court of the
Supreme Court of Jamaica. The Gun Court Act, 1974, also laid
down the procedure to be followed (in each of the divisions) .. G
For certain specified offences relating to unauthorized
possession, acquisition or disposal of firearm~ and
ammunition, "the Gun Court" was required to n;andabJrily
impose a sentence of detention on hard le1bour \ d•.,!snue :::oi..ld
only be discharged, at the direction of the Goven.c.; Gener:"
[-!
56 SUPREME COURT REPORTS [2014] 10 S.C.R.
A acting in accordance with the advice of the Review Board. The
Review Board was a non-judicial body under the Gun Court Act,
1974.
Lord Diplock while recording the majority view in Hinds
B .c;ase (supra), observed as under:-
"..... In seeking to apply to the interpretation of the
Constitution of Jamaica what has been said in particular
cases about other constitutions, care must be taken to
distinguish between judicial reasoning which depended on
c the express words used in the particular constitution under
consideration and reasoning which depended on what,
though not expressed, is nonetheless a necessary
implication from the subject-matter and structure of the
constitution and the circumstances in which it had been
D made. Such caution is particularly necessary in cases
dealing with a federal constitution in which the question
immediately in issue may have depended in part on the
separation of the judicial power from the iegislative or
executive power of the federation or of one of its
E component states and in part upon the division of judicial
power between the federation and a component state.
Nevertheless all these constitutions have two things
in common which have an important bearing on their
interpretation. They differ fundamentally in their nature from
F ordinary legislation passed by the parliament of a
sovereign state. They embody what is in substance an
agreement reached between representatives of the
various shades of political opinion in the state as to the
structure of the organs of government through which the
G plenitude of the sovereign power of the state is to be
exercised in future. All of them were negotiated as well as
drafted by persons nurtured in the tradition of that branch
of the common law of England that is concerned with public
law and familiar in particular with the basic concept of
H
. :.;.;..~,'
MADRAS BAR ASSOCIATION v. UNION OF INDIA 57
[JAGDISH SINGH KHEHAR, J.]
separation of legislative, executive and judicial power as A
it had been developed in the unwritten constitution of the
United Kingdom. As to their subject-matter, the peoples
for whom new constitutions were being provided were
already living under a system of public law in which the
local institutions through which government was carried on, B
the legislature, the executive and the courts, reflected the
same basic concept. The new constitutions, particularly in
the case of unitary states, were evolutionary not
revolutionary. They provided for continuity of government
through successor institutions, legislative, executive and c
judicial, of which the members were to be selected in a
different way, but each institution was to exercise powers
which, although enlarged, remained of a similar character
to those that had been exercised by the corresponding
institution that it had replaced. 0
Because of this a great deal can be. and in drafting
practice often is, left to necessary implication from the
adoption in the new constitution of a governmental
structure which makes provision for a legislature. an
executive and a judicature. It is taken for granted that the E
basic principle of separation of powers will apply to the
exercise of their respective functions by these three organs
of government. Thus the constitution does not normally
contain any express prohibitio"h on the exercise of
legislative powers by the execut1v~ or of judicial powers F
by either the executive or the legislature. As respects the
judicature. particularly if it is intended that the previously
existing courts shall continue to function. the constitution
itself may even omit any express provision conferring
judicial power upon the judicature. Nevertheless it is well G
established as a rule of construction applicable to
constitutional instruments under which this governmental
structure is adopted that the absence of express word~ to
that effect does not prevent the legislative. the executive
and the judicial powers of the new state being exercisable H
'
58 SUPREME COURT REPORTS [2014] 10 S.C.R.
A exclusively by the legislature, by the executive and by the
judicature respectively. To seek to apply to constitutional
instruments the canons of construction applicable to
ordinary legislation in the fields of substantive criminal or
civil law would, in iheir Lordships' view, be misleading -
8 particularly those applicable to taxing statutes as to which
it is a well-established principle that express words are
needed to impose a charge on the subject.
In the result there can be discerned in all those
constitutions which have their origin in an Act of the
c Imperial Parliament at Westminster or in an Order in
Council, a common pattern and style of draftsmanship
which may conveniently be described as 'the Westminster
model.'
D Before turning to those express provisions of the
Constitution of Jamaica upon which the appellants rely in
these appeals, their Lordships will make some general
observations about the interpretation of constitutions which
follow the Westminster model.
E
All Constitutions on the Westminster model deal
under separate Chapter headings with the legislature. the
executive and the judicature. The Chapter dealing with the
judicature invariably contains provisions dealing with the
method of appointment and security of tenure of the
F members of the judiciary which are designed to assure to
them a degree of independence from the other two
branches of government. It may, as in the case of the
Constitution of Ceylon, contain nothing more. To the extent
to which the Constitution itself is silent as to the distribution
G of the plenitude of judicial power between various courts
it is implicit that it shall continue to be distributed between
and exercised by the courts that were already in existence
when the new Constitution came into force; but the
legislature, in the exercise of its power to make laws for
H the 'peace, order and good government' of the state, may
MADRAS BAR ASSOCIATION v. UNION OF INDIA 59
[JAGDISH SINGH KHEHAR, J.]
provide for the establishment of new courts and for the A
transfer to them of the whole or part of the jurisdiction
previously exercisable by an existing court. What. however.
is implicit in the very structure of a Constitution on the
Westminster model is that judicial power. however it be
distributed from time to time between various courts. is to B
continue to be vested in persons appointed to hold judicial
office in the manner and on the terms laid down in the
Chapter dealing with the judicature. even though this is not
expressly stated in the Constitution (Liyanage v. R. [1966)
1 All ER 650 at 658, [1967) A.C. 259 at 287, 288). c
The more recent constitutions on the Westminster
model, unlike their earlier prototypes, include a Chapter
dealing with fundamental rights and freedoms. The
provisions of this Chapter form part of the substantive law
of the state and until amended by whatever special D
procedure is laid down in the Constitution for this purpose,
impose a fetter upon the exercise by the legislature, the
executive and the judiciary of the plenitude of their
respective powers. The remaining Chapters of the
Constitutions are primarily concerned not with the E
legislature, the executive and the judicature as
abstractions, but with the persons who shall be entitled
collectively or individually to exercise the plenitude of
legislative, executive or judicial powers - their qualifications
for legislative, executive or judicial office, the methods of F
selecting them, their tenure of office, the procedure to be
followed where powers are conferred on a class of persons
acting collectively and the majorities required for the
exercise of those powers. Thus. where a constitution on
the Westminster model speaks of a particular 'court' G
already in existence when the Constitution comes into
force it uses this expression as a collective description of
all those individual judges who. whether sitting alone or
with other judges or with a jury. are entitled to exercise the
jurisdiction exercised by that court before the Constitution H
60 SUPREME COURT REPORTS [2014] 10 S.C.R.
A came into force. Any express provision in the constitution
for the appointment or security of tenure of judges of that
court will apply to all individual judges subsequently
appointed to exercise an analogous jurisdiction. whatever
other name may be given to the 'court' in which they sit
B (Attorney-General for Ontario v. Attorney-General for
Canada) [19251 A.C. 750.
Where, under a constitution on the Westminster
model, a taw is made by the Parliament which purports to
confer jurisdiction on a court described by a new name,
c the question whether the law conflicts with the provisions
of the constitution dealing with the exercise of the judicial
power does not depend upon the label (in the instant case
'The Gun Court') which the Parliament attaches to the
judges when exercising the jurisdiction conferred on them
D by the law whose constitutionality is impugned. It is the
substance of the law that must be regarded, not the form.
What is the nature of the jurisdiction to be exercised by
the judges who are to compose the court to which the new
label is attached? Does the method of their appointment
E and the security of their tenure conform to the requirements
of the constitution applicable to judges who, at the time the
constitution came into force, exercised jurisdiction of that
nature? (Attorney-General for Australia v. R. and
Boilermakers' Society of Australia, [1957] A.C. 288, 309-
F 310).
xxx xxx xxx
..... So in deciding whether any provisions of a law
passed by the Parliament of Jamaica as an ordinary law
G are inconsistent with the Constitution of Jamaica, neither
the courts of Jamaica. nor their Lordships' Board are
concerned with the propriety or expediency of the law
impugned. They are concerned solely with whether those
provisions, however reasonable and expedient, are of
H such a character that they conflict with an entrenched
MADRAS BAR ASSOCIATION v. UNION OF INDIA 61
[JAGDISH SINGH KHEHAR, J.]
provision of the Constitution and so can be validly passed A
only after the Constitution has been amended by the
method laid down by it for altering that entrenched
provision."
The question examined by the Privy Council in the 8
background of the factual/legal position expressed above, was
recorded in the following words:-
"The attack on the constitutionality of the Full Court Division
of the Gun Court may be based on two grounds. The first
is that the Gun Court Act 1974 purports to confer on a court C
consisting of persons qualified and appointed as resident
magistrates a jurisdiction which under the provisions of
Chapter VII of the Constitution is exercisable only by a
person qualified and appointed as a judge of the Supreme
Court. The second ground is much less fundamental. It D
need only be mentioned briefly, for it arises only if the first
ground fails. It is that even if the conferment of jurisdiction
on a Full Court Division consisting of three resident
magistrates is valid, section 112 of the Constitution
requires that any assignment of a resident magistrate to E
sit in that division should be made by the Governor-General
acting on the recommendation of the Judicial Service
Commission and not by the Chief Justice as the 1974 Act
provides."
F
The question was dealt with, by opining as under:-
"Chapter VII of the Constitution, 'The Judicature,' was
in their Lordships' view intended to deal with the
appointment and security of tenure of all persons holding
any salaried office by virtue of which they are entitled to G
exercise civil or criminal jurisdiction in Jamaica. For this
purpose they are divided into two categories: (i) a higher
judiciary, consisting of judges of the Supreme Court and
judges of the Court of Appeal, and (ii) a lower judiciary,
consisting of those described in section 112 (2), viz.: H
62 SUPREME COURT' REPORTS [2014] 10 S.C.R.
A ' ... Resident magistrate, judge of the Traffic Court,
Registrar of the Supreme Court, Registrar of the Court of
Appeal and such other offices connected with the courts
of Jamaica as, subject to the provisions of this Constitution,
may be prescribed by Parliament.'
B
Apart from the offices of judge and registrar of the
Court of Appeal which were new, these two categories
embraced all salaried members of the judiciary who
exercised civil or criminal jurisdiction in Jamaica at the date
when the Constitution came into force. A minor jurisdiction,
c particularly in relation to juveniles, was exercised by
justices of the peace but, as in England, they sat part-time
only, were unpaid and were not required to possess any
professional qualification.
D Common to both categories, with the exception of
the Chief Justice of the Supreme Court and the President
of the Court of Appeal, is the requirement under the
Constitution that they should be appointed by the
Governor-General on the recommendation of the Judicial
E Service Commission - a body established under section
111 whose composition is different from that of the Public
Service Commission and consists of persons likely to be
qualified to assess the fitness of a candidate for judicial
office.
F The distinction between the higher judiciary and the
lower judiciary is that the former are given a greater degree
of security of tenure than the latter. There is nothing in the
Constitution to protect the lower judiciary against
Parliament passing ordinary laws (a) abolishing their office
G (b) reducing their salaries while they are in office or (c)
providing that their appointments to judicial office shall be
only for a short fixed term of years. Their independence of
the good-will of the political party which commands a bare
majority in the Parliament is thus not fully assured. The only
H protection that is assured to them by section 112 is that
MADRAS BAR ASSOCIATION v. UNION OF INDIA 63
[JAGDISH SINGH KHEHAR, J.]
they cannot be removed or disciplined except on the A
recommendation of the Judicial Service Commission with
a right of appeal to the Privy Council. This last is a local
body established under section 82 of the Constitution
whose members are appointed by the Governor-General
after consultation with the Prime Minister and hold office 8
for a period not exceeding three years.
In contrast to this, judges of the Supreme Court and
of the Court of Appeal are given a more firmly rooted
security of tenure. They are protected by entrenched C
provisions of the Constitution against Parliament passing
ordinary laws (a) abolishing their office (b) reducing their
salaries while in office or (c) providing that their tenure of
office shall end before they attain the age of 65 years. They
are not subject to any disciplinary control while in office.
0
They can only be removed from office on the advice of the
Judicial Committee of Her Majesty's Privy Council"in the
United Kingdom given on a reference made on the
recommendation of a tribunal of inquiry consisting of
persons who hold or have held high judicial office in some
part of the Commonwealth. E
The manifest intention of these provisions is that all
those who hold any salaried judicial office in Jamaica shall
be appointed on the recommendation of the Judicial
Service Commission and that their independence from F
political pressure by Parliament or by the Executive in the
exercise of their judicial functions shall be assured by
granting to them such degree of security of tenure in their
office as is justified by the importance of the jurisdiction
that they exercise. A clear distinction is drawn between the G
security of tenure appropriate to those judges who exercise
the jurisdiction of the higher judiciary and that appropriate
to those judges who exercise the jurisdiction of the lower
judiciary.
H
64 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Their Lordships accept that there is nothing in the
Constitution to prohibit Parliament from establishing by an
ordinary law a court under a new name, such as the
"Revenue Court." to exercise part of the jurisdiction that was
being exercised by members of the higher judiciary or by
B members of the lower judiciary at the time when the
Constitution came into force. To do so is merely to change
the label to be attached to the capacity in which the
persons appointed to be members of the new court
exercise a jurisdiction previously exercised by the holders
c of one or other of the judicial offices named in Chapter VI I
of the Constitution. In their Lordships' view. however. it is
the manifest intention of the Constitution that any person
appointed to be a member of such a court should be
appointed in the same manner and entitled to the same
security of tenure as the holder of the judicial office named
D
in Chapter VII of the Constitution which entitled him to
exercise the corresponding jurisdiction at the time when
the Constitution came into force.
Their Lordships understand the Attorney-General to
E concede that salaried judges of any new court that
Parliament may establish by an ordinary law must be
appointed in the manner and entitled to the security of
tenure provided for members of the lower judiciary by
section 112 of the Constitution. In their Lordships' view this
F concession was rightly made. To adopt the familiar words
used by Viscount Simonds in Attorney-General of Australia
v. R. and Boilermakers' Society of Australia [19571 A.C.
288, 309-310, it would make a mockery of the Constitution
if Parliament could transfer the jurisdiction previously
G exercisable by holders of the judicial offices named in
Chapter VII of the Constitution to holders of new judicial
offices 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 in Chapter VII for the appointment of members
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 65
[JAGDISH SINGH KHEHAR, J.]
of the judicature. If this were the case there would be A
nothing to prevent Parliament from transferring the whole
. .
of the judicial power of Jamaica (with two minor exceptions
referred to below) to bodies composed of persons who,
not being members of 'the Judicature,' would not be
entitled to the protection of Chapter VII at all. B
What the Attorney-General does not concede is that
Parliament is prohibited by Chapter Vil from transferring
to a court composed of duly appointed members of the
lower judiciary jurisdiction which, at the time the C
Constitution came into force, was exercisable only by a
court composed of duly appointed members of the higher
judiciary.
In their Lordships' view section 110 of the
Constitution makes it apparent that in providing in section D
103 (1) that: There shall be a Court of Appeal for Jamaica
.. .' the draftsman treated this form of words as carrying
with it by necessary implication that the judges of the court
required to be established under section 103 should
exercise an appellate jurisdiction in all substantial civil E
cases and in all serious criminal cases; and that the words
that follow, viz. 'which shall have such jurisdiction and
powers as may be conferred upon it by this Constitution
or any other law,' do not entitle Parliament by an ordinary
law to deprive the Court of Appeal of a significant part of F
such appellate jurisdiction or to confer it on judges who do
not enjoy the security of tenure which the Constitution
guarantees to judges of the Court of Appeal. Section 110
(1) of the Constitution which grants to litigants wide rights
of appeal to Her Majesty in Council but only from G
'decisions of the Court of Appeal,' clearly proceeds on this
assumption as to the effect of section 103, Section 110
would be rendered nugatory if its wide appellate jurisdiction
could be removed from the Court of Appeal by an ordinary
law without amendment of the Constitution.
H
66 SUPREME ·coURT REPORTS [2014) 10 S.C.R.
A Their Lordships see no reason why a similar
implication should not be drawn from the corresponding
words of section 97. The Court of Appeal of Jamaica was
a new court established under the Judicature (Appellate
Jurisdiction) Law 1962 , which came into force one day
B before the Constitution, viz. on 5 August, 1962. The
Supreme Court of Jamaica had existed under that title
since 1880. In the judges of that court there had been
vested all that jurisdiction in Jamaica which in their
Lordships' view was characteristic of a court to which in
c 1962 the description 'a Supreme Court' was appropriate
in a hierarchy of courts which was to include a separate
'Court of Appeal.' The three kinds of jurisdiction that are
characteristic of a Supreme Court where appellate
jurisdiction is vested in a separate court are: (1) unlimited
original jurisdiction in all substantial Civil cases; (2)
D
unlimited original jurisdiction in all serious criminal
offences; (3) supervisory jurisdiction over the proceedings
of inferior courts (viz. of the kind which owes its origin to
the prerogative writs of certiorari, mandamus and
prohibition).
E
That section 97 (1) of the Constitution was intended
to preserve in Jamaica a Supreme Court exercising this
characteristic jurisdiction is, in their Lordships' view,
supported by the provision in section 13 (1) of- the
F Jamaica (Constitution) Order in Council 1962, that 'the
Supreme Court in existence immediately before the
commencement of this Order shall be the Supreme Court
for the purposes of the Constitution.' This is made an
entrenched provision of the Constitution itself by section 21
G (1) of the Order in Council, and confirms that the kind of
court referred to in the wo,ds 'There shall be a Supreme
Court for Jamaica' was a court which would exercise in
Jamaica the three kinds of jurisdiction characteristic of a
Supreme Court that have been indicated above.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 67
[JAGDISH SINGH KHEHAR, J.]
If, as contended by the Attorney-General, the words A
italicised above in section 97 (1) entitled Parliament by an
ordinary law to strip the Supreme Court of all jurisdiction
in civil and criminal cases other than that expressly
conferred upon it by section 25 and section 44, what would
be left would be a court of such limited jurisdiction that the B
label 'Supreme Court' would be a false description; so too
if all its jurisdiction (with those two exceptions) were
exercisable concurrently by other courts composed of
members of the lower judiciary. But more important, for this
is the substance of the matter, the individual citizen could c
be deprived of the safeguard, which the makers of the
Constitution regarded as necessary, of having important
questions affecting his civil or criminal responsibilities
determined by a court, however named, composed of
judges whose independence from all local pressure by
0
Parliament or by the executive was guaranteed by a
security of tenure more absolute than that provided by the
Constitution for judges of inferior courts.
Their Lordships therefore are unable to accept that
the words in section 97 (1 ), upon which the Attorney- · E
General relies, entitle Parliament by an ordinary law to vest
in a new court composed of members of the lower judiciary
a jurisdiction that forms a significant part of the unlimited
civil, criminal or supervisory jurisdiction that is characteristic
of a 'Supreme Court' and was exercised by the Supreme F
Court of Jamaica at the time when the Constitution came
into force, at any rate where such vesting is accompanied
by ancillary provisions, such as those contained in section
6 (1) of the Gun Court Act 1974 , which would have the
consequence that all cases falling within the jurisdiction of G
the new court would in practice be heard and determined
by it instead of by a court composed of judges of the
Supreme Court.
xxxx xxxx xxxx
H
68 SUPREME COURT REPORTS [2014] 10 S.C.R.
A In their Lordships' view the provisions of the 1974
Act. in so far as they provide for the establishment of a Full
Court Division of the Gun Court consisting of three resident
magistrates. conflict with Chapter VII of the Constitution
and are accordingly void by virtue of section 2.
B
)()()()( )()()()( )()()()(
Thus Parliament, in the exercise of its legislative
power, may make a law imposing limits upon the
discretion of the judges who preside over the courts by
c whom offences against that law are tried to inflict on an
individual offender a custodial sentence the length of which
reflects the judge's own assessment of the gravity of the
offender's conduct in the particular circumstance of his
case. What Parliament cannot do. consistently with the
D separation of powers. is to transfer from the judiciary to
any executive body whose members are not appointed
under Chapter VII of the Constitution. a discretion to
determine the severity of the punishment to be inflicted
upon an individual member of a class of offenders. Whilst
E none would suggest that a Review Board composed as
is provided in section 22 of the Gun Court Act 1974 would
not perform its duties responsibly and impartially. the fact
remains that the majority of its members are not persons
qualified by the Constitution to exercise judicial powers.
F A breach of a constitutional restriction is not excused by
the good intentions with which the legislative power has
been exceeded by the· particular law. If. consistently with
the Constitution. it is permissible for the Parliament to
confer the discretion to determine the length of custodial
sentences for criminal offences on a body composed as
G
the Review Board is. it would be equally permissible to a
less well-intentioned Parliament to confer the same
discretion on any other person or body of persons not
qualified to exercise judicial powers, and in this way.
without any amendment of the Constitution. to open the
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 69
[JAGDISH SINGH KHEHAR, J.]
door to the exercise of arbitrary power by the executive in A
the whole field of criminal law.
xxxx xxxx xxxx
Their Lordships would hold that the provisions of
section 8 of the Act relating to the mandatory sentence of B
detention during the Governor-General's pleasure and the
provisions of section 22 relating to the Review Board are
a law made after the coming into force of the Constitution
which is inconsistent with the provisions of the Constitution
relating to the separation of powers. They are accordingly C
. void by virtue of section 2 of the Constitution."
(ii) In the same sequence, learned counsel for the petitioners
invited our attention to Liyanage v. Reginam, (1966) 1 All ER
650. It is first necessary to record the factual/legal matrix, in the D
cited judgment. All the 11 appellants in the matter before the
Privy Council, were charged with offences arising out of an
abortive coup d;e'tat on 27.1.1962. The factum of the said coup
d'e'tat, was set out in a White Paper issued by the Government
of Ceylon on 13.2.1962. The White Paper gave the names of
E
13 alleged conspirators including the appellants. The White
Paper concluded by observing, that a deterrent punishment of
a severe character ought to be imposed, on all those who were
guilty. On 16.3.1962, the Criminal Law (Special Provisions) Act,
No. 1 of 1962 was passed. It was given retrospective effect from
F
1.1.1962. It was limited in operation to those who were
accused of offences against the State, on or around27.1.1962.
The above Act legalized imprisonment of the appellants, while
they were awaiting trial. It modified a section of the Penal Code,
so as to enact ex post facto, a new offence, to meet the
circumstance of the abortive coup. It altered ex post facto, the G
law of evidence, regarding settlements made by an accused,
while in custody. It enacted a minimum punishment,
accompanied by forfeiture of property, for the offences for which
the appellants were tried. Under Section 440A of the Criminal
Procedure Code, trial in case of sedition, could be directed to H
70 SUPREME COURT REPORTS [2014] 10 S.C.R.
A be before three judges without a jury. The instant provision was
amended by the above Act, so as to extend the same, to the
offences for which the appellants were charged. Under Section
9 of the above Act, the Minister of Justice was empowered to
nominate the three judges. In exercise of his powers under
B Section 9, the Minister of Justice had nominated three judges,
to try the appellants without a jury. The Supreme Court upheld
the objection raised by the appellants, that Section 9 was ultra
vires the Constitution of Ceylon, and that, the nomination was
invalid. Thereafter, the Criminal Law Act, No. 31 of 1962 was
c passed. It repealed Section 9 of the earlier Act. It amended the
power of nomination, in that, the power was conferred on the
Chief Justice. On appeal by the appellants, against the
conviction and sentence from their trial before a Court of three
judges nominated under the Act, it was held, that the Criminal
Law (Special "Provisions) Act, No. 1 of 1962, as well as, the
0
Criminal Law Act, No. 31 of 1962, were invalid for the two
reasons. Firstly, under the Constitution of Ceylon, there was a
separation of powers. The power of the judicature, while the
Constitution stood, could not be usurped or infringed by the
executive or the legislature. Secondly, the Criminal Law
E (Special Provisions) Act, No. 1 of 1962, as well as, the Criminal
Law Act, No. 31 of 1962 were aimed at individuals concerned
in an abortive coup, and were not legislation effecting criminal
law of general application. Although not every enactment ad
hominem, and ex post facto, necessarily infringed the judicial
F power, yet there was such infringement in the present case, by
the above two Acts. In addition to the above conclusions, it was
also held, that the joint effect of the Ceylon Constitution Order
in Council 1946, and the Ceylon Independence Act, 1947, was
intended to, and resulted in, giving the Ceylon Parliament, full
G legislative powers of an independent sovereign State.
Consequently, the legislative power of the Ceylon Parliament,
was not limited by inability to pass laws, which offended
fundamental principles of justice. The Privy Council while
examining the above controversy, rendered the following
H opinion:-
MADRAS BAR ASSOCIATION v. UNION OF INDIA 71
[JAGDISH SINGH KHEHAR, J.]
"In Ceylon. however. the position was different. The A
change of sovereignty did not in itself produce any
apparent change in the constituents or the functioning of
the Judicature. So far as the courts were concerned their
work continued unaffeclt:!d by the new Constitution. and the
Ordinances under which they functioned remained in force. B
The judicial system had been established in Ceylon by the
Charter of Justice in 1833. Clause 4 of the Charter read:
"And to provide for the administration of justice
hereafter in Our said Island Our will and pleasure C
is. and We do hereby direct that the entire
administration of justice. civil and criminal therein.
shall be vested exclusively in the courts erected and
constituted by this Our Charter ... and it is Our
pleasure and We hereby declare. that it is not. and
shall not be competent to the Governor of Our said D
Island by any Law or Ordinance to be by him made.
with the advice of the Legislative Council thereof or
otherwise howsoever. to constitute or establish any
court for the administration of justice in any case
civil or criminal, save as hereinafter is expressly E
saved and provided."
Clause 5 established the Supreme Court and clause 6 a
Chief Justice and two puisne judges. Clause 7 gave the
Governor powers of appointing their successors. There F
follow many clauses with regard to administrative,
procedural and jurisdictional matters. Some half a century
later Ordinances (in particular the Courts Ordinance)
continued the jurisdiction and procedure of the courts.
Thereunder the courts have functioned continuously up to G
the present day.
xxx xxx xxx
The Constitution is significantly divided into parts -
"Part 2 The Governor-General," "Part 3 The Legislature," H
72 SUPREME COURT REPORTS [2014] 10 S.C.R.
A "Part 4 Delimitation of Electoral Districts," "Part 5 The
Executive," "Part 6 "Fhe Judicature," "Part 7 The Public
Service," "Part 8 Finance." And although no express
mention is made of vesting in the judicature the judicial
power which it already had and was wielding in its daily
B process under the Courts Ordinance, there is provision
under Part 6 for the appointment of judges by a Judicial
Service Commission which shall not contain a member of
either House, but shall be composed of the Chief Justice
and a judge and another person who is or shall have been
c · a judge. Any attempt to influence any decision of the
Commission is made a criminal offence. There is also
provision that judges shall not be removable except by the
Governor-General on an address of both Houses.
These provisions manifest an intention to secure in
D the judiciary a freedom from political, legislative and
executive control. They are wholly appropriate in a
Constitution which intends that judicial power shall be
vested only in the judicature. They would be inappropriate
in a Constitution by which it was intended that judicial
E power should be shared by the executive or the legislature.
The Constitution's silence as to the vesting of judicial
power is consistent with its remaining, where it had lain
for more than a century, in the hands of the judicature. It is
not consistent with any intention that henceforth it should
F pass to or be shared by, the executive or the legislature.
Counsel for the appellants succinctly summarises his
attack on the Acts in question as follows. The first Act was
wholly bad in that it was a special direction to the judiciary
as to the trial of particular prisoners who were identifiable
G
(in view of the White Paper) and charged with particular
offences on a particular occasion. The pith and substance
of both Acts was a legislative plan ex post facto to secure
the conviction and enhance the punishment of those
particular individuals. It legalised their imprisonment while
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 73
[JAGDISH SINGH KHEHAR, J.]
they were awaiting trial. It made admissible their A
statements inadmissibly obtained during that period. It
altered the fundamental law of evidence so as to facilitate
their conviction. and finally it altered ex post facto the
punishment to be imposed on them.
B
In their Lordships' view that cogent summary fairly
describes the effect of the Acts. As has been indicated
already, legislation ad hominem which is thus directed to
the course of particular proceedings may not always
amount to an interference with the functions of the judiciary. C
But in the present case their Lordships have no doubt that
there was such interference; that it was not only the likely
but the intended effect of the impugned enactments; and
that it is fatal to their validity. The true nature and purpose
of these enactments are revealed by their conjoint impact
on the specific proceedings in respect of which they were D
. designed, and they take their colour, in particular, from the
alterations they purported to make as to their ultimate
objective, the punishment of those convicted. These
alterations constituted a grave and deliberate incursion into
the judicial sphere. Quite bluntly, their aim was to ensure E
that the judges in dealing with these particular persons on
these particular charges were deprived of their normal
discretion as respects appropriate sentences. They were
compelled to sentence each offender on conviction to not
less than ten years' imprisonment, and compelled to order F
confiscation of his possessions, even though his part in the
conspiracy might have been trivial.
The trial court concluded its long and careful
judgment with these words ((1965), 67 CNLR at p. 424): G
"But we must draw attention to the fact that the Act of 1962
radically altered ex post facto the punishment to which the
defendants are rendered liable. The Act removed the
discretion of the court as to the period of the sentence to
be imposed, and compels the court to impose a term of H
74 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 10 years' imprisonment, although we would have wished
to differentiate in the matter of sentence between those
who organised the conspiracy and those who were
induced to join it. It also imposes a compulsory forfeiture
of property. These amendments were not merely
B retroactive: they were also ad hoc, applicable only to the
conspiracy which was the subject of the charges we have
tried. We are unable to understand this discrimination. To
the courts, which must be free of political bias, treasonable
offences are equally heinous, whatever be the complexion
c of the Government in power or whoever be the offenders."
Their Lordships sympathise with that protest and
wholly agree with it.
One might fairly apply to these Acts the words of
D Chase J., in the Supreme Court of the United States in
Calder v. Bull: ''These acts were legislative judgments; and
an exercise of judicial power."
Blackstone in his Commentaries, Vol. I (4th Edition),
p. 44, wrote:
E
"Therefore a particular act of the legislature to
confiscate the goods of Titius, or to attaint him of
high treason does not enter into the idea of a
municipal law: for the operation of this act is spent
F upon Titius only and has no relation to the
community in General: it is rather a sentence than
a law."
If such Acts as these were valid the judicial power
G could be wholly absorbed by the legislature and taken out
of the hands of the judges. It is appreciated that the
legislature had no such general intention. It was beset by
a grave situation and it took grave measures to deal with
it, thinking, one must presume, that it had power to do so
and was acting rightly; But that consideration is irrelevant,
H
MADRAS BAR AS-SOCIATION-V.Ul'illO~ OF lNDrA---75-
[JAGDISH SINGH KHEHAR, J.]
and gives no validity to acts which infringe the Constitution. A
What is done once, if it be allowed, may be done again
and in a lesser crisis and less serious circumstances; and
thus judicial power may be eroded. Such an erosion is
contrary to the clear intention of the Constitution. In their
Lordships' view the Acts were ultra vires and invalid. B
:xxx :xxx :xxx
It was agreed between the parties that if the Acts
were ultra vires and invalid, the convictionslcannot stand.
Their Lordships have therefore humbly advised Her C
Majesty that this appeal should be allowed and that the
convictions should be quashed."
(iii) Reference was then made to Director of Public
Prosecutions of Jamaica v. Mollison, (2003) 2 AC 411. The o
factual controversy which led to the above cited decision of the
Privy Council may be noticed. On 16.3.1994, when Kurt Mollison
was merely 16 years old, he committed a murder in furtherance
of a robbery. His offence was described as a "capital murder",
under the law of Jamaica. After his trial, he was convicted on E
21.4.1997, when he was 19 years old. On 25.4.997, he was
sentenced under Section 29(1) of the Juveniles Act, 1951, to
be detained during the Governor-General's pleasure. On
16.2.2000, although the Court of Appeal refused his prayer for
leave to appeal against his conviction, it agreed t6 examine his
F
contention, whether the sentence imposed on him was
compatible with the provisions of the Constitution of Jamaica.
The Court of Appeal accepted his contention. The sentence of
detention, during the Governor-General's pleasure, was set
aside. In its place, he was sentenced to life imprisonment, with
the recommendation that, he be not considered for parole till G
he had served a term of 20 years' imprisonment. In the
controversy which came up for consideration before the Privy
Council, there were two main i~sues. Firstly, whether the
sentence of detention during the Governor-General's pleasure
authorized by Section 29(1), was a power exercised by him in H
76 cSUPREME COURT REPORTS [2014] 10 S.C.R.
A his executive capacity. And secondly, whether the power to
determine the measure for punishment to be inflicted on an
offender, is compatible with the Constitution. The Privy Council,
while examining the controversy, opined as under:-
B "Section 29 of the Juveniles Act 1951
[3] Section 3 of the Offences against the Person Act 1864,
as amended, provides that every person convicted of
capital murder shall be sentenced to death. But special
provision has been made for those who commit this crime
c when aged under 18. Following a number of amendments
made pursuant to section 4 of the Jamaica (Constitution)
Order in Council 1962 (SI 1962/1500), section 29 of the
Juveniles Act 1951 now provides, so far as material to the
main issue in this appeal, as follows:
D
"(1) Sentence of death shall not be pronounced on
or recorded against a person convicted of an
offence if it appears to the court that at the time
when the offence was committed he was under the
E age of 18 years, but in place thereof the court shall
sentence him to be detained during Her Majesty's
pleasure, and, if so sentenced, he shall,
notwithstanding anything in the other provisions of
this Law, be liable to be detained in such place
(including, save in the case of a child, an adult
F
correctional centre) and under such conditions as
the Minister may direct, and while so detained shall
be deemed to be in legal custody.
(4) The Governor-General may release on licence
G any person detained under subsection (1) or (3) of
this section. Such licence shall be in such form and
contain such conditions as the Governor-General
may direct, and may at any time be revoked or
varied by the Governor-General. Where such
H licence is revoked the person to whom it relates
MADRAS BAR ASSOCIATION v. UNION OF INDIA 77
[JAGDISH SINGH KHEHAR, J.]
shall return forthwith to such place as the Governor- A
General may direct, and if he fails to do so may be
arrested by any constable without warrant and taken
to such place."
[4] Section 29 as originally enacted was amended in 1964 B
to substitute "Minister" for "Governor" in subsection (1) and
"Governor General" for "Governor" in each of the four
references originally made to the Governor in subsection
(4). In 1975 subsection (1) was further amended to make
plain, reversing the effect of Baker v The Queen, [1975] AC C
774, (1975] 3 All ER 55, that the statutory prohibition on
pronouncement of the death sentence applied to those
appearing to be aged under 18 at the time when they had
committed the offence, not at the time of sentence. In 1985,
the reference to "an adult correctional centre" was
substituted for the previous reference to "a prison". The D
enacted reference to "Her Majesty's pleasure" has not,
however, been amended, no doubt because section 68(2)
of the Constitution of Jamaica provides that the executive
authority of Jamaica may be exercised on behalf of Her
Majesty by the Governor-General. In recognition of this E
constitutional reality, it appears to be the practice where
section 29(1) applies, as was done in this case, to call the
sentence one of detention during the Governor-General's
pleasure, and in this opinion that usage will be adopted.
F
xxx xxx xxx
The Constitution
xxx xxx xxx
G
The first question: is section 29 compatible with the
Constitution of Jamaica?
(11] Both the Director and the Solicitor-General, who
appeared with him, ac~pted at .the hearing that, subject
to their argument based on section 26(8) of the H
78 SUPREME COURT REPORTS [2014) 10 S.C.R.
A Constitution, section 29 of the Juveniles Act 1951 infringes
the rights guaranteed by, and so is inconsistent with,
sections 15(1 )(b) and 20(1) of the Constitution. Given this
conc$sion, rightly made, it is unnecessary to do more than
note ft,e reason for it. A person detained during the
B Governor-General's pleasure is deprived of his personal
liberty not in execution of the sentence or order of a court
but at the discretion of the executive. Such a person is not
afforded a fair hearing by an independent and impartial
court, because the sentencing of a criminal defendant is
c part of the hearing and in cases such as the present
sentence is effectively passed by the executive and not by
a court independent of the executive.
xxx xxx xxx
D (13) ..... It does indeed appear that the sentencing
provisions under challenge in the Hinds case were held to
be unconstitutional not because of their repugnancy to any
of the rights guaranteed by sections in Chapter Ill of the
Constitution but because of their incompatibility with a
E principle on which the Constitution itself was held to be
founded. There appears to be no reason why (subject to
the other arguments considered below) the reasoning in
the Hindscase does not apply to the present case. It would
no doubt be open to the Board to reject that reasoning,
but it would be reluctant to depart from a decision which
F
has stood unchallenged for 25 years, the more so since
the decision gives effect to a very important and salutary
principle. Whatever overlap there may be under
constitutions on the Westminster model between the
exercise of executive and legislative powers, the
G
separation between the exercise of judicial powers on the
one hand and legislative and executive powers on the other
is total or effectively so. Such separation, based on the rule
of law, was recently described by Lord Steyn as "a
characteristic feature of democracies": R (Anderson) v
H
MADRAS BAR ASSOCIATION v. UNION OF INOIA 79
[JAGDISH SINGH KHEHAR, J.]
Secretary of State for the Home Department, [2002] 4 All A
ER 1089, [2002] 3 WLR 1800, at pp. 1821-1822, para 5
of the latter report. In the opinion of the Board, Mr Fitzgerald
has made good his challenge to section 29 based on its
incompatibility with the constitutional principle that judicial
functions (such as sentencing) must be exercised by the B
judiciary and not by the executive.
)()()( )()()( )()()(
..... The nature and purpose of the sentence of
detention during the Governor-General's pleasure are C
clear, as explained above. The only question is who should
decide on the measure of punishment the detainee should
suffer. Since the vice of section 29 is to entrust this
decision to the executive instead of the judiciary, the
necessary modification to ensure conformity with the D
Constitution is (as in Browne v The Queen. [2000] 1 AC
45) to substitute "the court's" for "Her Majesty's" in
subsection (1) and "the court" for each reference to "the
Governor-General" in subsection (4)."
E
(iv) Our attention was also invited to Harry Brandy v. Human
Rights and Equal Opportunity Commission, (1995) 183 CLR
245. The instant judgment was rendered by the High Court of
Australia. The factual controversy which led to the above
determination is being narrated first. The plaintiff Harry Brandy F
was engaged as an officer of the Aboriginal and Torres Strait
Islander Commission. The third defendant John Bell was also
an officer of the said Commission. The plaintiff and the third
defendant continued to serve the Commission until the
Commission itself ceased to exist. On 13.3.1990, John Bell
lodged a complaint with the Human Rights and Equal G
Opportunity Commission, wherein he alleged, verbal abuse and
threatening behaviour on the part of Harry Brandy, while both
were in the employment of the Commission. Thereafter, John
Bell issued a notice under Section 24 of the Racial
H
80 SUPREME COURT REPORTS [2014) 10 S.C.R.
A Discrimination Act, 1975. And accordingly, the Commissioner
referred the complaint to the Commission. The power of the
Commission, to hold an enquiry under the Racial Discrimination
Act, 1975 against Harry Brandy, was exercised by the second
defendant. The second defendant had been appointed under
B Section 24 of the Racial Discrimination Act, 1975, which
empowered the Minister, to appoint a person to perform and
discharge the functions of the Commissioner. The second
defendant returned his findings under Section 25Z of the Racial
Discrimination Act, 1975 on 22.12.1993. The defendant's
c complaint was found to be substantiat~d. In disposing of the
controversy, the second defendant required Harry Brandy, the
plaintiff, to do the following acts/course of conduct:-
"(1) that the Plaintiff do apologise to the Third Defendant,
the form of the apology being annexed to the determination;
D
(2) that the Plaintiff do pay the sum of $2 500 to the Third
Defendant by way of damages for the pain, humiliation,
distress and loss of personal dignity suffered by the Third
Defendant;
E
(3) that ATSIC do take disciplinary action against the
Plaintiff, in relation to the conduct which he perpetrated
against the Third Defendant;
(4) that ATSIC do apologise to the Third Defendant in
F relation to the handling of his complaint, the form of the
apology being annexed to the determination;
(5) that ATSIC do pay the sum of $i0 000 to the Third
Defendant by way of damages for the pain, humiliation,
G distress and loss of personal dignity suffered by the Third
Defendant."
In order to contest the determination rendered by the
second defendant, Harry Brandy raised a challenge to the
provisions of the Racial Discrimination Act, 1975. The
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 81
[JAGDISH SINGH KHEHAR, J.]
challenge raised by him came to be formulated in the A
following words:-
"ln consequence of the amendments embodied in the Sex
Discrimination and other Legislation Amendment Act 1992
and/or the Law and Justice Legislation Amendment Act 8
1993 as they affect the Racial Discrimination Act 1975 are
any, and if so which, of the provisions of Part Ill of the Racial
Discrimination Act invalid?"
While adjudicating upon the matter, the High Court of
Australia held as under:- C
"The plaintiffs challenge to the Act-
15. The plaintiffs challenge to particular provisions of the
Act is based upon the proposition that they provide for an
D
exercise of judicial power otherwise than in conformity with
Ch.Ill of the Commonwealth Constitution in that the power
is exercised by the Commission which is not a court
established pursuant to s.71 and constituted in accordance
with s.72 of the Constitution. The plaintiff further argues that
the correctness of this proposition is not affected by the E
provisions for review by the Federal Court.
)()()( )()()( )()()(
21. Although many decision-making functions may take F
their character as an exercise of judicial, executive or
legislative power from their legislative setting, the character
of the decision-maker and the nature of the decision-
making process, some decision-making functions are
exclusive and inalienable exercises of judicial power (34 G
Reg. v. Davison (1954) 90 CLR at 368-370 per Dixon CJ
and McTiernan J). As Dixon CJ and McTiernan J observed
in Reg. v. Davison (35 ibid. at 369) :
"The truth is that the ascertainment of existing rights by the
judicial determination of issues of fact or law falls H
82 SUPREME COURT REPORTS [2014) 10 S.C.R.
A exclusively within judicial power so that the Parliament
cannot confide the function to any person or body but a
court constituted under ss. 71 and 72 of the Constitution".
In that statement, the expression "judicial determination"
means an authotitative determination by means of the
B
judicial method, that is, an enforceable decision reached
by applying the relevant principles of law to the facts as
found.
xxx xxx xxx
c
25. Turning to the case before the Court, whatever might
be the enforceability of a declaration that the plaintiff "do
apologise", a declaration that the plaintiff "do pay the sum
of $2 500" to the third defendant, once registered, attracts
D the operation of s.53 of the Federal Court of Australia Act
1976 (Cth). By that section, a person in whose favour a
judgment is given is entitled to the same remedies for
enforcement, by execution or otherwise, as are allowed by
the laws of the State or Territory applicable. In the present
case, this means New South Wales. Section 53 does not
E
affect the operation of any provision made by or under any
other Act or the Rules of Court for the execution and
enforcement of judgments of the Court (40 s.53(2)) .
26. But s.25ZAB goes beyond providing the
F machinery for the enforcement of a determination. It
purports to give a registered determination effect "as if it
were an order made by the Federal Court". A judicial order
made by the Federal Court takes effect as an exercise of
Commonwealth judicial power. but a determination by the
G Commission is neither made nor registered in the exercise
of judicial power. An exercise of executive power by thE2.
Commission and the performance of an administrative
function by the Registrar of the Federal Court simply cannot
create an order which takes effect as an exercise of
H judicial power; conversely, an order which takes effect as
MADRAS BAR ASSOCIATION v. UNION OF INDIA 83
[JAGDISH SINGH KHEHAR, J.]
'
an exercise of judicial power cannot be made except after A
the making of a judicial determination. Thus. s.25ZAB
purports to prescribe what the Constitution does not
permit."
(v) Our attention was then invited to Reference Re.Residential
B
Tenancies Act, 123 DLR (3d) 554. The factual matrix, in
furtherance of which the above judgment was rendered by the
Supreme Court of Canada, is as follows. The provisions of the
Residential Tenancies Act, 1979 (Ontario), by which the
Residential Tenancy Commission was empowered to order
eviction of tenants, as also, could require landlords and tenants C
to comply with the obligations imposed under the said Act, were
assailed, as offending against the limitation contained in
Section 96 of the British North America Act, 1867, and
therefore, ultra vires. In recording its conclusions on a similar
analogy, as in the judgments noticed above, the Supreme Court D
of Canada observed as under:-
"Under s. 92(14) of the British North America Act,
1867, the provincial Legislatures have the legislative power
in relation to the administration of justice in the Province. E
This is a wide power but subject to subtraction of ss. 96
to 100 in favour of the federal authority. Under s. 96 the
Governor General has the sole power to appoint the judges
of the Superior. District and County Courts in each
Province. Under s. 97 the Judges who are to be appointed F
to the Superior. District and County Courts are to be
selected from the respective bars of each Province. Under
s. 100 the Parliament of Canada is obliged to fix and
provide for their salaries. Section 92(14) and ss. 96 to 100
represent one of the important compromises of the Fathers G
of Confederation. It is plain that what was sought to be
achieved through this compromise. and the intended effect
of s. 96. would be destroyed if a Province could pass
legislation creating a tribunal. appoint members thereto.
and then confer on the tribunal the jurisdiction of the
H
84 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Superior Courts. What was conceived as a strong
constitutional base for national unity. through a unitary
judicial system. would be gravely undermined. Section 96
has thus come to be regarded as limiting provincial
competence to make appointments to a tribunal exercising
B s. 96 judicial powers and therefore as implicitly limiting
provincial competence to endow a provincial tribunal with
such powers.
IV
c The belief that any function which in 1867 had been
vested in a s. 96 Court must forever remain in that Court
reached its apogee in the judgment of Lord Atkin
in Toronto Corporation v. York Tp. Et. Al.. (1938) 1 DLR
593. (1938) AC 415. (1938) 1 WWR 452. Describing s.
D 96 as one of the "three principal pillars in the temple of
justice ... not to be undermined", Lord Atkin held that the
Ontario Municipal Board could not validly receive "judicial
authority". At the same time. he held that the Municipal
Board was in 'pith and substance' an administrative body,
E and the impugned 'judicial functions' were severable from
the administrative powers given to the Board under its
enabling legislation. There was no analysis of the inter-
relationship between the judicial and administrative
features of the legislative scheme; the assumption was that
F any attempt to confer a s. 96 function on a provincially-
appointed tribunal was ultra vires the Legislature.
This sweeping interpretation of s. 96, with its
accompanying restrictive view of provincial legislative
authority under s. 92, was limited almost immediately by
G the judgment of this Court in the Reference re Adoption
Act and Other Act, etc., (1938) 3 DLR 497, 71 CCC 110,
(1938) SCR 398. Chief Justice Duff he:d that the
jurisdiction of inferior Courts was not "fixed forever as it
stood at the date of Confederation". On his view, it was
H quite possible to remove jurisdiction from a Superior Court
MADRAS BAR ASSOCIATION v. UNION OF INDIA 85
[JAGDISH SINGH KHEHAR, J.] .
and vest it in a Court of summary jurisdiction. The question A
which must be asked was whether "the jurisdiction
conferred upon Magistrates under these statutes broadly
conforms to a type of jurisdiction generally exercisable by
Courts of summary jurisdiction rather than the jurisdiction
of Courts within the purview of s. 96" (p. 514). In B
the Adoption Reference, Duff C.J. looked to the historical
practice in England and concluded that the jurisdiction
conferred on Magistrates under the legislation before the
Court in the Reference was analogous to the jurisdiction
under the English Poor Laws, a jurisdiction which had C
belonged to courts of summary nature rather than to
Superior Courts. On this basis, the legislation was upheld.
The Adoption Reference represented a liberalization of the
view of s. 96 adopted by the Privy Council in Toronto
v. York, at least in the context of a transfer of jurisdiction
from a Superior Court to an inferior Court. D
The same process of liberalization, this time in the
context of a transfer of jurisdiction from a Superior Court
to an administrative tribunal. was initiated by the Privy
Council in Labour Relations Board of Saskatchewan E
v. John East Iron Works, Limited, (1948) 4 DLR 673,
(1949) AC 134, (1948) 2 WWR 1055. Lord Simonds
.proposed a two-fold test. The first limb of the test is to ask
whether the board or tribunal exercises "judicial power''.
Lord Simonds did not propose a 'final' answer to the F
definition of "judicial power'', but he suggested at p. 680
DLR. p. 149 AC. that:
" ... the conception of the judicial function is
inseparably bound up with the idea of a suit G
between parties. whether between Crown and
subject or between subject and subject. and that it
is the duty of the Court to decide the issue between
those parties. with whom alone it rests to initiate or
defend or compromise the proceedings."
H
86 SUPREME COURT REPORTS [2014] 10 S.C.R.
A If the answer to the initial question as to "judicial
power" is in the negative. then that concludes the matter
in favour of the provincial board. If. however. the power is
in fact a judicial power. then it becomes necessary to ask
a second question: in the exercise of that power. is the
8 tribunal analogous to a Superior. District or County Court?
xxx xxx xxx
Step two involves consideration of the function within its
institutional setting to determine whether the function itself
c is different when viewed in that setting. In particular, can
the function still be considered to be a 'judicial' function?
In addressing the issue, it is important to keep in mind the
further statement by Rand J. in Dupont v. Inglis (at p. 424
DLR, p. 543 SCR) that " ... it is the subject-matter rather
D than the apparatus of adjudication that is determinative".
Thus the question of whether any particular function is
'judicial' is not to be determined simply on the basis of
procedural trappings. The primary issue is the nature of
the question which the tribunal is called upon to decide.
E Where the tribunal is faced with a private dispute between
parties, and is called upon to adjudicate through the
application of a recognized body of rules in a manner
consistent with fairness and impartiality, then, normally, it
is acting in a 'judicial capacity'. To borrow the terminology
of Professor Ronald Dworkin. the judicial task involves
F
t ~estions of 'principle'. that is. consideration of the
rimpeting rights of individuals or groups. This can be
contrasted with questions of 'policy' involving competing
views of the collective good of the community as a whole.
(See Dworkin, Taking Rights Seriously (1977) at pp. 82-
G 90 (Duckworth)."
A perusal of the conclusions recorded by the Supreme Court
of Canada reveals, that the court evolved a three step test to
determine the constitutional validity of a provision which vested
H adjudicatory functions in an administrative tribunal. The first step
MADRAS BAR ASSOCIATION v. UNION OF INDIA 87
[JAGDISH SINGH KHEHAR, J.]
was determined in the light of the histcrical conditions existing A
in 1867, i.e. before the British North America Act, 1867 was
enacted. The first step required a determination whether at the
time of Confederation, the power or jurisdiction now vested in
an administrative tribunal, was exercised through a judicial
court process. If the answer to the first step was in the negative, B
the constitution of the administrative tribunal would be valid. If
historical evidence indicated, that the power, now vested with
an administrative tribunal, was identical or analogous to a
power exercised under Section 96 Courts at Confederation,
then the matter needed to be examined further. The second c
step was to determine, whether the power to be exercised by
the administrative tribunal, should be considered as a judicial
function. Insofar as the instant aspect of the matter is
concerned, it was illustratively concluded, that where power
vested in the administrative tribunal was in respect of
0
adjudication of disputes between the parties, which required
to be settled through an application of a recognized body of
rules, in a manner consistent with fairness and impartiality then
the said power could be classified as judicial power/function.
If, however, while applying the second step, the answer was in E
the negative, it was not necessary to proceed with the matter
further, and the vesting of the power with the administrative
tribunal should be considered as valid. If the power or
jurisdiction is exercised in a judicial manner, then it is
imperative to proceed to the third and final step. The third step
contemplates analysis and review of the administrative F
tribunal's functions as a whole, and to examine the same in its
entire institutional context. It contemplated an examination of
the inter-relationship between the administrative tribunal's
judicial powers, and the other powers and jurisdiction conferred
by the legislative enactment. If a judicial hearing is a must, G
whereafter a judgment was required to be rendered, the
administrative tribunal would be deemed to be exercising
jurisdiction which is ordinarily vested in a Court . It is after
recording a finding in the affirmative on all the three steps, that
it will be possible to conclude, whether judicial functions have H
88 SUPREME COURT REPORTS [2014] 10 S.C.R.
A been required to be exercised by the concerned administrative
tribunal. Having examined the controversy in Reference Re
Residential Tenancies Act (supra), the Supreme Court of
Canada arrived at the conclusion, that the Residential Tenancy
Commission could have been authorized to grant orders for
B possession to a landlord or to grant orders for specific
performance of a tenancy.
23. Finally, learned counsel for the petitioners placed
reliance on "Constitutional Law of Canada", by Peter W. Hogg
(third edition, 1992, by Carswell, Thomson Professional
C Publishing) in order to assert, that even under Constitutions
where the separation of power rule has not been explicitly
provided for, there would be limitations in delegation of Court
functions to tribunals. Relevant text on the subject, from the
above treatise is being reproduced hereunder:-
0
"7.3 Implications of Constitution's judicature sections
(a) Separation of powers
There is no general "separation of powers" in the
E Constitution Act, 1867. The Act does not separate the
legislative, executive and judicial functions and insist that
each branch of government exercise only "its own" function.
As between the legislative and executive branches, any
separation of powers would make little sense in a system
F of responsible government; and it is clearly established that
the Act does not call for any such separation. As between
the judicial and the two political branches, there is likewise
no general separation of powers. Either the Parliament or
the Legislatures may by appropriate legislation confer non-
G judicial functions on the courts and (with one important
exception, to be discussed) may confer judicial functior-s
on bodies that are not courts.
Each Canadian jurisdiction has conferred non-
judicial functions on its courts, by enacting a statute which
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 89
[JAGDISH SINGH KHEHAR, J.]
enables the government to refer a question of law to the A
courts for an advisory opinion. The rendering of advisory
opinions to government is traditionally an "executive"
function, performed by the law officers of the government.
For that reason, the supreme Court of the United States
and the High Court of Australia have refused to render B
advisory opinions, reasoning that a separation of powers
doctrine in their Constitutions confines the courts to the
traditional judicial function of adjudicating upon genuine
controversies. But in the Reference Appeal (1912), A-G
Ont. V.A.-G. Can. (Reference Appeal) (1912) AC 571, the c
Privy Council refused to read any such limitation into
Canada's Constitution. Their lordships upheld the federal
reference statute, apparently as a law in relation to the
supreme court of Canada (s.101 ). The provincial reference
statutes are also valid as laws in relation to the D
administration of justice in the province (s.92(14)).
The conferral of judicial functions on bodies which are
not courts is likewise subject to no general prohibition.
However, here there is an important qualification to be
made. The courts have held that the provincial Legislatures E
may not confer on a body other than a superior, district or
county court judicial functions analogous to those
performed by a superior, district or county court. This little
separation of powers doctrine has been developed to
preclude evasion of the stipulations of ss. 96 to 100 of the F
constitution Act, 1867.
If ss. 96 to 100 of the constitution Act. 1867 were
read literally, they could easily be evaded by a province
which wanted to assume control of its judicial G
appointments. The province could increase the jurisdiction
of its inferior courts so that they assumed much of the
jurisdiction of the higher courts: or the province could best
higher-court jurisdiction in a newly-established tribunal, and
call that tribunal an inferior court or an administrative
H
90 SUPREME COURT REPORTS [2014) 10 S.C.R.
A tribunal. It is therefore not surprising that the courts have
added a gloss to s. 96 and the associated constitutional
provisions. What they have said is this: if a province
invests a tribunal with a jurisdiction of a kind that ought
property to belong to a superior. district or county court.
B then that tribunal. whatever its official name. is for
constitutional purposes a superior. district or county court
and must satisfy the requirements of s. 96 and the.
associated provisions of the constitution Act. 1867. This
means that such a tribunal will be invalidly constituted.
unless its members (1) are appointed by the federal
c government in conformity with s. 96, (2) are drawn from
the bar of the province in conformity with ss. 97 and 98.
and (3) receive salaries that are fixed and provided by the
federal parliament in conformity with s. 100.
D So far the law is clear, and the policy underlying it
is comprehensible. But the difficulty lies in the definition
of those functions that ought properly to belong to a
superior, district or county court. The courts have
attempted to fashion a judicially enforceable rule which
E would separate "s. 96 functions" from other adjudicatory
functions. The attempt has not been successful, and it is
difficult to predict with confidence how the courts will
characterize particular adjudicatory functions. The
uncertainty of the law, with its risk of nullification, could be
F a serious deterrent to the conferral of new adjudicatory
functions on inferior courts or administrative tribunals, and
a consequent impediment to much new regulatory or
social policy. For the most part, the courts have exercised
restraint in reviewing the provincial statutes which create
G new adjudicatory jurisdictions, so that the difficulty has not
been as serious as it could have been. However, in the
last two decades, there has been a regrettable
resurgence of s. 96 litigation: five challenges to the powers
of inferior courts or tribunals based on s. 96 have
succeeded in the Supreme Court of Canada, A.G. Que.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 91
[JAGDISH SINGH KHEHAR, J.]
v. Farrah [1978] 2 S.C.R. 638; Re Residential Tenancies A
Act [1981] 1 S.C.R. 714; Crevier v. A.G. Que. [1981] 2
S.C.R. 220; Re B.C. Family Relations Act [1982] 1.S.C.R.
62; McEvoy v. A.G.N.B. [1983] 1 S.C.R. 704. Since the
abolition of Privy Council appeals, two other challenges
have also been successful, namely, A.G. Ont. v. Victoria B
medical building [1960] S.C.R. 32; Seminary of Chicoutimi
v. A.G. Que. [1973] S.C.R. 681, and these decisions have
spawned many more challenges. These developments
are described in the text that follows.
24. It was also the submission of the learned counsel for C
the petitioners, that the proposition of law highlighted
hereinabove on the basis of the provisions of constitutions of
different countries (Jamaica, Ceylon, Australia and Canada)
decided either by the Privy Council or the highest courts of the
concerned countries, is ful!y applicable to India as well. In order D
to demonstrate this, he placed reliance on State of
Maharashtra v. Labour Law Practitioners' Association, (1998)
2 sec 688. The controversy in the cited case originated with
the filing of a writ petition by the respondent Association
challenging the appointment of Assistant Commissioners of E
Labour (i.e., Officers discharging executive functions under the
Labour 'Department). The above appointments had been
made, consequent upon amendments to the provisions of the
Bombay Industrial Relations Act, and the Industrial Disputes
(Maharashtra Amendment) Act. The submission advanced at F
the hands of the respondent Association was, that Labour
Courts had been constituted in the State of Maharashtra, under
the Industrial Disputes Act, the Bombay Industrial Relations Act,
as also, the Maharashtra Recognition of Trade Unions and
Prevention of Unfair Labour Practices, Act. Qualifications of G
persons to be appointed as a judge of the Labour Court under
the Industrial Disputes Act, was stipulated in Section 7, which
provided as under:-
"(a) that he was or had been a Judge of a High Court; or
H
92 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (b) that he had for a period of not less than three years
been a District Judge or an Additional District Judge; or
(c) that he had held the office of the Chairman or any other
Member of the Labour Appellate Tribunal or of any Tribunal
for a period of not less than two years; or
B
(d) that he had held any judicial office in India for not less
than seven years; or
(e) that he had been the Presiding Officer of a Labour
c Court constituted under any provincial Act for not less than
five years."
By the Industrial Disputes (Maharashtra Amendment) Act,
1974, Section 7 was amended, and three more sources of
recruitment for the post of judge of the Labour Court were
D added. These were:-
"(d-1) he has practiced as an advocate or attorney for not
less than seven years in the High Court, or any court,
subordinate thereto, or any Industrial Court or Tribunal or
E Labour Court, constituted under any law for the time being
in force; or
(d-2) he holds a degree in law of a University established
by law in any part of India and is holding or has held an
office not lower in rank than that of a Deputy Registrar of
F
any such Industrial Court or Tribunal for not less than five
years; or
(d-3) he holds a degree in law of University established
by law in any part of India and is holding or has held an
G office not lower in rank than that of Assistant
Commissioner of Labour under the State Government for
not less than five years."
Under the Bombay Industrial Relations Act, as it originally
H
MADRAS BAR ASSOCIATION v. UNl()N OF INDIA 93
[JAGDISH SINGH KHEHAR, J.]
stood, Section 9 provided, that only such persons would be A
eligible for appointment as a judge of the Labour Court, who
possessed the qualifications laid down under Article 234 of the
Constitution, for being eligible to enter judicial service in the
State of Maharashtra. By the Maharashtra Act 47 of 1977,
Section 9 of the Bombay Industrial Relations Act was amended B
by substituting a new sub-section (2), which replaced the
original sub-section (2) of Section 9. The amended sub-section
(2) was as follows:-
"9. (2) A person shall not be qualified for appointment C
as the presiding officer of a Labour Court, unless:
(a) he has held any judicial office in India ~or
not less than five years; or
(b) he has practiced as an Advocate or Attorney for D
not less than seven years in the High Court or any
court subordinate thereto, or in any Industrial Court,
Tribunal or Labour Court constituted under any law
for the time being in force; or
(c) he holds a degree in law of a University E
established by law in any part of India and is holding
or has held an office not lower in rank than that of
Deputy Registrar of any such Industrial Court or
Tribunal, or of Assistant Commissioner of Labour
under the State Government, in both cases for not F
less than five years."
In the first instance, this Court for the first time declared the
salient components of the functions exercised by a civil court ,
as under:- G
"6. In the case of The Bharat Bank Ltd. v. Employees. AIR
1950 SC 188, this Court considered whether an Industrial
Tribunal was a court. It said that one cannot go by mere
nomenclature. One has to examine the functions of a
H
94 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Tribunal and how it proceeds to discharge those functions.
It held that an Industrial Tribunal had all the trappings of a
court and performed functions which cannot but be
regarded as judicial. The Court referred to the Rules by
which proceedings before the Tribunal were regulated. The
B Court dwelt on the fact that the powers vested in it are
similar to t11ose exercised by civil courts under the Code
of Civil Procedure when trying a suit. It had the power of-
ordering discovery, inspection etc. and forcing the
attendance of witnesses, compelling production of
c documents and so on. It gave its decision on the basis of
evidence and in accordance with law. Applying the test laid
down in the case of Cooper v. Wilson, (1937) 2 K.B. 309
at p.340, this Court said that "a true judicial decision
presupposes an existence of dispute between two or more
parties and then involves four requisites - (1) the
D
presentation of their case by the parties: (2) ascertainment
of facts by means of evidence adduced by the parties
often with the assistance of argument; (3) if the dispute
relates to a question of law, submission of legal arguments
by the parties; and (4) by decision which disposes of the
E
whole matter by findings on fact and application of law to
facts so found. Judged by the same tests. a Labour Court
would undoubtedly be a court in the true sense of the term.
The question, however, is whether such a.court and the
presiding officer of such a court can be said to hold a post
F in the judicial service of the State as defined in Article 236
of the Constitution."
The other relevant observations recorded in the above cited
judgment are reproduced below:-
G
"13. Reliance has been placed upon this judgment as
showing that judicial service is interpreted narrowly to
cover only the hierarchy of civil courts headed by the
District Judge. This Court, however, was not considering
the position of other civil courts, in the context of the
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 95
[JAGDISH SINGH KHEHAR, J.]
extensive definition given to the term "district judge". This A
Court was concerned with preserving independence of the
judiciary from the executive and making sure that persons
from non-judicial services. such as. the police, excise or
revenue were not considered as eligible for appointment
as District Judges. That is why the emphasis is on the fact B
that the judicial service should consist exclusively of judicial
officers. This judgment should not be interpreted narrowly
to exclude from judicial service new hierarchies of civil
courts being set up which are headed by a judge who can
be considered as a District Judge bearing in mind the c
extensive definition of that term in Article 236.
14. The High Court has. therefore. correctly interpreted the
observations of this Court in Chandra Mohan vs. State of
U.P .. AIR 1966 SC 1987. as giving paramount importance
to the enforcement of the constitutional scheme providing D
for independence of the judiciary. The concern of the court
was to see that this independence was not destroyed by
an indirect method.
xxx xxx xxx E
18. In the case of Shri Kumar Padma Prasad v. Union of
India & Ors., (1992) 2 SCC 428, this Court had to
consider qualifications for the purpose of appointment as
a Judge of the High Court under Article 217 of the
Constitution. While interpreting the expression "judicial F
office" under Article 217(2)(a), this Court held that the
expression "judicial office" must be interpreted in
consonance with the scheme of Chapters V and VI o{ Part
VI of the Constitution. So construed it means a judicial
office which belongs to the judicial service as defined G
under Article 236(b). Therefore, in order to qualify for
appointment as a judge of a High Court, a person must
hold a judicial office which must be a part of the judicial
service of the State. After referring to the cases of Chandra
Mohan (supra) and Statesman (Private) Ltd. vs. H.R. Deb. H
96 SUPREME COURT REPORTS [2014] 10 S.C.R.
A AIR 1968 SC 1495, this Court said that the term "judicial
office" in its generic sense may include a wide variety of
offices which are connected with the administration of
justice in one way or the other. Officers holding various
posts under the executive are often vested with magisterial
B power to meet a particular situation. The Court said,
"Did the framers of the Constitution have this type
of 'offices' in mind when they provided a source of
appointment to the high office, of a judge of the High
Court from amongst the holders of a 'judicial office'?
c The answer, has to be in the negative. We are of
the view that holder of judicial office under Article
217(2)(a) means the person who exercises only
judicial functions. determines causes inter-parties
and renders decisions in a judicial capacity. He
D must belong to the judicial service which as a class
is free from executive control and is disciplined to
uphold the dignity, integrity and independence of the
judiciary."
E Going by these tests laid down as to what constitutes
judicial service under Article 236 of the Constitution. the
Labour Court judges and the judges of the Industrial Court
can be held to belong to judicial service. The hierarchy
contemplated in the case of Labour Court judges is the
F hierarchy of Labour Court judges and Industrial Court
judges with the Industrial Court judges holding the superior
position of District Judges. The Labour Courts have also
been held as subject to the High Court's power of
superintendence under Article 227.
G xxx xxx xxx
20. The constitutional scheme under Chapter V of Part VI
dealing with the High Courts and Chapter VI of Part VI
dealing with the subordinate courts shows a clear anxiety
H on the part of the framers of the Constitution to preserve
MADRAS BAR ASSOCIATION v. UNION OF INDIA 97
[JAGDISH SINGH KHEHAR, J.]
and promote independence of the judiciary from the A
executive. Thus Article 233 which deals with appointment
of District Judges requires that such appointments shall be
made by the Governor of the State in consultation with the
High Court. Article 233(2) has been interpreted as
prescribing that "a person in the service of the Union or B
the State" can refer only to a person in the judicial service
of the Union or the State. Article 234 which deals with
recruitment of persons other than District Judges to the
judicial service requires that their appointments can be
made only in accordance with the Rules framed by the c
Governor of the State after consultation with the State
Public Service Commission and with the High Court.
Article 235 provides that the control over district courts and
courts subordinate thereto shall be vested in the High
Court; and Article 236 defines the expression "District D
Judge" extensively as covering judges of a City Civil Court
etc. as earlier set out, and the expression "judicial service"
as meaning a service consisting exclusively of persons
intended to fill the post of the District Judge and other civil
judicial posts inferior to the post of District Judge. E
Therefore. bearing in mind the principle of separation of
powers and independence of the judiciary, judicial service
contemplates a service exclusively of judicial posts in
which there will be a hierarchy headed by a District Judge.
The High Court has rightly come to the conclusion that the
persons presiding over Industrial and Labour Courts would F
constitute a judicial service so defined. Therefore. the
recruitment of Labour Court judges is required to be made
in accordance with Article 234 of the Constitution."
25. According to the learned counsel for the petitioners, G
the judgments and text cited hereinabove, are fully applicable
on the subject of administration of justice through courts in India.
Insofar as the instant aspect of the matter is concerned, learned
counsel placed reliance on Article 50 of the Constitution, which
is reproduced hereunder:- H
98 SUPREME COURT REPORTS [2014] 10 S.C.R.
A "50. Separation of judiciary from executive - The State shall
take steps to separate the judiciary from the executive in
the public services of the State."
Based on Article 50 aforementioned, it was the contention
of the learned counsel for the petitioners, that the Constitution
8
itself mandates a separate judicial hierarchy of courts distinct
from the executive.
26. Coupled with the above mandate, it was the contention
of the learned counsel for the petitioners, that the provisions of
C the Income Tax Act, the Customs Act, and the Excise Act prior
to independence of this country, and even thereafter, vested the
High Courts with an exclusive jurisdiction to settle "questions
of law" emerging out of tax disputes. It was further contended,
that even after the enforcement of the Constitution, with effect
D from 26.11.1949, the adjudicatory power to decide substantial
questions of law, continued to be vested in the High Courts,
inasmuch as, the jurisdictional High Courts continued to
exercise appellate jurisdiction. The position has remained
unaltered till date. It is, therefore, the contention of the learned
E counsel for the petitioners, that historically, constitutionally and
legally, the appellate jurisdiction in direct/indirect tax matters,
has remained with the Hig.h Courts, and it is not permissible
either by way of an amendment to the Constitution itself, or by
enacting a legislation, to transfer the said appellate jurisdiction
F exercised by the High Courts to a quasi-judicial tribunal.
The third contention:
27. In the course of the submissions advanced by the
learned counsel for the petitioners on the third contention,
G wherein it was sought to be submitted, that "separation of
powers", the "rule of law" and "judicial review" constitute
amongst others, the "basic structure" of the Constitution, it was
submitted, that Article 3238 inserted by the Constitution (Forty-
second Amendment) Act, 1976 was violative of the above
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 99
[JAGDISH SINGH KHEHAR, J.]
mentioned components of the basic structure of the Constitution. A
Article 3238 is being extracted hereunder:-
"3238. Tribunals for other matters - (1) The appropriate
Legislature may, by law, provide for the adjudication or trial
by tribunals of any disputes, complaints, or offences with
8
respect to all or any of the matters specified in clause (2)
with respect to which such Legislature has power to make
laws.
(2) The matters referred to in clause (1) are the
following, namely:- c
(a) levy, assessment, collection and enforcement of
any tax;
(b) foreign exchange, import and export across
D
customs frontiers;
(c) industrial and labour disputes;
(d) land reforms by way of acquisition by the State
of any estate as defined in article 31A or of any E
rights therein or the extinguishment or modification
of any such rights or by way of ceiling on agricultural
land or in any other way;
(e) ceiling on urban property;
F
(f) elections to either House of Parliament or the
House or either House of the Legislature of a State,
but excluding the matters referred to in article 329
and article 329A;
G
(g) production, procurement, supply and distribution
of foodstuffs (including edible oilseeds and oils) and
such other goods as the President may, by public
notification, declare to be essential goods for the
purpose of this article and control of prices of such
goods; H
100 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (h} rent, its regulation and control and tenancy issues
including the rights, title and interest of landlords and
tenants;
(i) offences against laws with respect to any of the
matters specified in sub-clauses (a) to (h) and fees
B
in respect of any of those matters;
(j) any matter incidental to any of the matters
specified in sub-clauses (a) to (i).
c (3) A law made under clause (1) may-
(a) provide for the establishment of a hierarchy of
tribunals;
(b} specify the jurisdiction. powers (including the
D power to punish for contempt) and authority which
may be exercised by each of the said tribunals;
(c) provide for the procedure (including provisions
as to limitation and rules of evidence) to be
E followed by the said tribunals;
(d) exclude the jurisdiction of all courts except the
jurisdiction of the Supreme Court under article 136.
with respect to all or any of the matters falling within
the jurisdiction of the said tribunals;
F
(e) provide for the transfer to each such tribunal of
any cases pending before any court or any other
authority immediately before the establishment of
such tribunal as would have been within the
G jurisdiction of such tribunal if the causes of action
on which such suits or proceedings are based had
arisen after such establishment;
.
(f) contain such supplemental. incidental and
consequential provisions {including provisions as to
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 101
[JAGDISH SINGH KHEHAR, J.]
fees) as the appropriate Legislature may deem A
necessary for the effective functioning of. and for
the speedy disposal of cases by, and the
enforcement of the orders of. such tribunals.
(4) The provisions of this article shall have effect
8
notwithstanding anything in any other provision of this
Constitution or in any other law for the time being in force.
Explanation.-ln this article, "appropriate Legislature", in
relation to any matter, means Parliament or, as the case
may be, a State Legislature competent to make laws with C
respect to such matter in accordance with the provisions
of Part XI."
Insofar as the aforesaid provision is concerned it was
s.ubmitted, that Clause (3) of Article 3238 clearly violated all 0
the above mentioned ingredients of the "basic structure" theory.
In this behalf it was sought to be asserted, that establishment
of a hierarchy of tribunals implicitly led to the inference, that the
existing judicial process, where adjudication was before a court
of law, was to be substituted in its entirety. Thereby, even the E
existing appellate process which was vested in High Courts
was sought to be substituted by tribunals. It was submitted, that
creation of a parallel judicial system, was alien to the provisions
of the Constitution, which recognized the judiciary as an
' independent component, separate from the executive and the
legislature. It was accordingly vehemently asserted, that tile F
process of justice was being substituted, by tribunalization of
justice, which was clearly unacceptable under the Constitution.
Sub-clause (d) of Article 3238(3), according to the learned
counsel for the petitioners, divested jurisdiction vested in all
civil courts for the adjudication of the matters on the subjects G
referred to in Article 3238(2), including not only the 3ppellate
jurisdiction of High Courts, but also, the power of "judicial
review" vested in High Courts under Articles 226 and 227, of
the Constitution. It was also the contention of the learned
counsel for the petitioners, that despite decisions rendered by H
102 SUPREME COURT REPORTS [2014) 10 S.C.R.
A this Court, the legislature has repeated and reiterated what had
been found to be unsustainable in law.
28. While canvassing tlie aforesaid contention learned
counsel for the petitioners pointed out, that the above
mentioned Article 3238 was introduced by the Constitution
8
(Forty-second Amendment) Act, 1976, which was part of an
overall scheme, to drastically curtail the power of "judicial,
review'' vested with the higher judiciary. It was pointed out, that
all other objectionable provisions were deleted, and powers
earlier vested in superior courts were restored. However, Part
C XIV A of the Constitution, inserting Articles 323A and 3238 was
allowed to remain. It was submitted that Articles 323A and
3238, enabled the creation of parallel judiciary under executive
control. In order to support his aforestated contention, learned
counsel invited the Court's attention to the expressions
D "adjudication or trial", "disputes, complaints or offences",
"transfer of suits or proceedings", etc. which could be fashioned
in a manner different from that which presently prevailed. It was
pointed out, that the aforestated mandate contained in Article
3238 of the Constitution, was incompatible· with the "basic
E structure" of the Constitution, which mandates "separation of
powers".
29. In view of the aforementioned submissions, it was the
vehement contention of the learned counsel for the petitioners,
F that Article 3238(4) should be struck down. It was submitted,
that if the instant prayer of the petitioners does not find favour
with this Court, the alternative prayer of the petitioners was, that
Article 3238 must be purposefully interpreted, so as to bestow
equivalence commensurate to the Court sought to be
substituted by the tribunal. It was submitted, that it was
G imperative to provide for measures to ensure independence in
the functioning of tribunals substituting functions carried out by
courts. This could be done, according to learned counsel for
the petitioners, by extending the conditions of service applicable
to judges of the court sought to be substituted. In order to
H
MADRAS BAR ASSOCIATION v. UNICN OF INDIA 103
[JAGDISH SINGH KHEHAR, J.]
support his aforestated contention, learned counsel for the A
petitioners placed reliance on judgments rendered by this
Court, laying down the limits and parameters within which such
tribunals could be created. Despite the declaration of law by
this Court it was submitted, that the NTI Act, has been enacted,
which suffers from the same vices, which had already been B
found to be unconstitutional. For reasons of brevity, it is
considered inappropriate, to refer to all the judgments relied
upon by the rival parties on the instant issue. Suffice it to state,
that the same will be examined, only while recording
conclusions. c
The fourth contention:
30. While advancing the fourth contention, learned counsel
for the petitioners referred to various provisions of the NTI Act,_
. which would have the effect of compromising the independence D
of the NTT. We may briefly refer to the provisions of the said
Act, highlighted by the learned counsel for the petitioners, during
the course of hearing, as under:-
(i) First and foremost, .reference was made to Section 5
E
of the NTI Act. The same is being extracted hereunder:-
"5. ·Constitution and jurisdiction of Benches- (1) the
jurisdiction of the National Tax Tribunal may be exercised
by the Benches thereof to be constituted by the
Chairperson. F
(2) The Benches of the National Tax Tribunal shall ordinarily
sit at any place in the National Capital Territorv of Delhi or
such other places as the Central Government may. in
consultation with the Chairperson. notify: · G
Provided that the Chairperson may for adequate
reasons permit a Bench to hold its temporary sitting for a
period not exceeding fifteen days at a place other than its
ordinary place of seat.
H
104 SUPREME COURT REPORTS [2014) 10 S.C.R.
A (3) The Central Government shall notify the areas in relation
to which each bench of the National Tax Tribunal may
-~
exercise its jurisdiction.
(4) The Central Government"shall determine the number
of Benches and each Bench shall consist of two members.
B
(5) The Central Government may transfer a Member from
headguarters of one Bench in one State to the
headguarters of another Bench in another State or to the
headguarters of any other Bench within a State:
c
Provided that no member shall be transferred without the
concurrence of the Chairperson."
Referring to sub-section (2) of Section 5 it was sought to be
asserted, that benches of the NTT are ordinarily to function in
D the· National Capital Territory of Delhi. This, according to the
learned counsel for the petitioners, would deprive the litigating
assessee, the convenience of approaching the High Court of
the State to which he belongs. In this behalf it was sought to
be asserted, that in every tax related dispute, there is an
E asseessee on one side, and the Revenue on the other.
Accordingly, if the NTT is mandated to sit ordinarily in the
National Capital Territory of Delhi, assessees from far flung
States l(VOUld have to suffer extreme hardship for the redressal ·
of their grievance, especially at the appellate stage. Besides
F the hardships, it was pointed out, that each asseessee would
be subjected to unfathomable financial expense. Referring to
sub-section (5) of Section 5 of the NTT Act, it was the
submission of the learned counsel for the petitioners, that the
Central Government was vested with the power to transfer a
G Member from the headquarters of one bench in one State, to
the headquarters of another bench in another State. It was also
open to the Central Government to transfer a Member from one
bench to another bench in the same State. It was submitted,
that in case of High Courts, such power is exercised exclusively
H by the Chief Justice, in the best interest of the administration
MADRAS BAR ASSOCIATION v. UNION OF INDIA 105
[JAGDISH SINGH KHEHAR, J.]
of justice. It was submitted, that the Central Government, which A
is a stakeholder, could exercise the above power of transfer
for harassment and exploitation of sitting Members of the NTT.
In other words, an inconvenient Member could be moved away,
and replaced by one who would tow the desired line.
B
(ii) Likewise, learned counsel for the petitioners referred
to Section 6 of the NTI Act to demonstrate, that the same
would also have an undermining effect on the adjudicatory
process. Section 6 of the NTT Act is reproduced hereunder:-
"6. Qualifications for appointment of Chairperson and other C
Members -
(1) The Chairperson of the National Tax Tribunal shall be
a person who has been a Judge of the Supreme Court or
the Chief Justice of a High Court. o
(2) A person shall not be qualified for appointment as
Member unless he-
(a) is. or has been. or is eligible to be. a Judge of
a High Court; or E
(b) is. or has been. a Member of the Income-tax
Appellate Tribunal or of the Customs, Excise and
Service Tax Appellate Tribunal for at least five
years." F
Learned counsel for the petitioners pointed out, that sub-section
(2); aforementioned, laid down the qualifications for
appointment as Member of the NTT. Referring to clause (a) of
sub-section (2) of Section 6 of the NTT Act it was submitted,
that a person who is eligible to be a judge of a High Court, is G
to be treated as eligible as a member of the NTI. Inviting our
attention to Article 217 of the Constitution it was submitted, that
a person who is a citizen of India and has, for at least 10 years,
practiced· as an Advocate before one or the other High Court,
H
106 SUPREME COURT REPORTS [2014] 10 S.C.R.
A has been treated as eligible for being appointed as a Member
of the NTT. Referring to Section 8 of the NTT Act it was pointed
out, that a Member of the NTT is provided with a tenure of five
years, from the date of his appointment as Member of the NTT.
It was pointed out, that in terms of Article 217 of the Constitution,
B a person would easily become eligible for appointment as a
judge at or around the age of 35-40 years, and as such, if he
is assured a tenure of only five years, it would not be possible
for him to discharge his duties without fear or favour, inasmuch
as, he would always have a larking uncertainty in his mind about
c his future, after the expiry of the prescribed term of five years,
in the event of not being granted an extension. Relying on
clause (b) of Section 6(2) of the NTT Act, it was also the
submission of the learned counsel for the petitioners, that
Members of the Appellate Tribunals constituted under the
Income Tax Act, the Customs Act, and the Excise Act, are also
0
eligible for being appointed as Members of the NTT. In this
behalf it was sought to be asserted, that there are Accountant
Members of the Income Tax Appellate Tribunal, who too would
become eligible for appointment as Members of the NTT. It was
E submitted, that judicial experience on the niceties of law,
specially on the different aspects, which need to be dealt with
while adjudicating tax matters, would be alien to them,
inasmuch as they can only be experts on the subject of
accountancy. It was pointed out, that the jurisdiction vested in
the NTT, is an alternative jurisdiction to that of the High Court,
F and as such, it is difficult to appreciate how an Accountant
Member of the Income Tax Appellate Tribunal can be expected
to discharge duties relating to settling substantial questions of
law in the manner judges of the High Court dispense with the
aforesaid responsibilities.
G
(iii) Learned counsel for the petitioners th~n invited our
attention to Section 7 of the NTT Act. The said section is
reproduced hereunder:-
·1. Appointment of Chairperson and other Members - (1)
H
. ~_..
MADRAS BAR ASSOCIATION v. UNION OF INDIA 107
[JAGDISH SINGH KHEHAR, J.)
Subject to the provisions of sub-section (2), the A
Chairperson and every other Member shall be appointed
by the Central Government.
(2) The Chairperson and the other Members shall be
appointed by the Central Government on the
recommendations of a Selection Committee consisting of- 8
(a) the Chief Justice of India or a Judge of the
Supreme Court nominated by him;
(b) the Secretarv in the Ministry of Law and Justice c
(Department of Legal Affairs);
(c) the Secretary in the Ministry of Finance
(Department of Revenue).
(3) No appointment of the Chairperson or of any other D
Member shall be invalidated merely by reason of any
vacancy or any defect in the constitution of the Selection
Committee."
A perusal of sub-section (2) of Section 7 reveals the E
composition of the selection committee for selection of the .
Chairperson and Members of the NTT. It was sought to be
pointed out, that there were two representatives of the
executive, out of three member selection committee, and only
one member in the selection committee was from the judiciary.
Accordingly it was asserted, that the two representatives F
belonging to the executive would control the outcome of every
selection process. Since the NTT was, an alternative to the
jurisdiction earlier vested with the High Court, it was submitted,
that the same process of selection, as was prevalent for
appointment of judges of the High Court, should be adopted G
for selection of Chairperson and Members of the NTT. All that
is imperative and essential is, that the selection process should
be the same, as is in place, for the court sought to· be
substituted. It was also the contention of the learned counsel
for the petitioners, that a provision similar to Section 7(2) of the H
108 SUPREME COURT REPORTS [2014] 10 S.C.R.
A NTT Act, had been struck down by this Court, in State of
Maharashtra v. Labour Law Practitioners' Association (supra).
(iv) Learned counsel for the petitioners then invited our
attention to Section 8 of the NTT Act. Section 8 is being
reproduced hereunder:-
8
"8. Terms of office of Chairperson and other Members -
The Chairperson and every other Member 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-
c appointment:
Provided that no Chairperson or other Member shall
hold office as such after he has attained, -
(a) in the case of Chairperson, the age of sixty-eight
D years; and
(b) in the case of any other Member, the age of
sixty-five years."
E According to learned counsel, a perusal ofSection 8 reveals,
that a Chairperson and a Member of the NTT would hold office ·
for a term of five years, from the date of his/her appointment to
the NTT. It was, however sought to be pointed out, that a person
appointed as such, is clearly eligible for reappointment. It was
sought to be asserted, that a provision for reappointment, would
F itself have the effect of undermining the independence of the
Members of the NTT. It was sought to be asserted, that each
one of the appointees to the NTT would be prompted to
appease the Revenue, so as to solicit reappointment
contemplated under Section 8 of the NTT Act. In this behalf it
G was submitted, that the tenure of appointment to a tribunal, which
is to substitute a High Court, should be akin to that of a judge
of High Court.
(v) Our attention was then invited to Section 13 of the NTT
H Act, which is reproduced hereunder:-
-MADRAS BAR ASSOCIATION v. UNION OF INDIA 109
[JAGDISH SINGH KHEHAR, J.]
"13. Appearance before National Tax Tribunal - (1) A party A
to an appeal other than Government may either appear in
person or authorize one or more chartered accountants or
legal practitioners to present his or its case before the
National Tax Tribunal.
·B
(2) The Government may authorize one or more legal
practitioners or any of its officers to present its case before
the National Tax Tribunal.
Explanation - For the purposes of this Section,-
c
( a) "chartered accountant" means a chartered
accountant as defined in clause (b) of sub-section
(1) of section 2 of the Chartered Accountants Act,
1949 (38 of 1949) and who has obtai_ned a
certificate of practice under sub-section· (1) of o
section 6 of that Act;
(b) "legal practitioner'' means an advocate, a vakil
or any attorney of any High Court, and includes a
pleader in practice."
E
It was submitted, that besides allowing the assessee to
represent himself before the NTT, Section 13 allows him to be
represented through one or more Chartered Accountants or
legal practitioners. Thus far, according to learned counsel for
the petitioners, there seemed to be no difficulty in Section 13(1) F
of the NTT Act. However, allowing "any person duly authorized"
by the assessee to represent him before the NTT, is clearly
ununderstandable. It was submitted, that the main function of
the NTT would be to settle substantial questions of law on tax·
issues, and as such, under Section 13(1), it would be open to G
an assessee to engage an individual to represent him, even
though he is totally unqualified in the fields on which the
·adjudicatory process is to be conducted. Likewise, it is the
contention of the learned counsel for the petitioners, besides
legal practitioners, the Revenue is allowed to be represent~d
H
110 SUPREME COURT REPORTS [2014] 10 S.C.R.
A through any of its officers. It was sought to be asserted, that an
understanding of the text of the provision is one thing, whereas
interpreting it in the contemplated context, quite another. As
such, it was submitted, that officers of the Revenue, who lack
in interpretative skills, would be wholly unsuited for representing
B the Revenue before the NTT.
Submissions in oppositio·n. by the respondents/
interveners:
The first contention:
c
31. In response to the first contention, namely, that the
reasons for setting up the NTT were fallacious and non-existent,
and as such, the legislative enactment under reference creating
the NTT as an independent appellate forum to decide appeals
0 on "substantial questions" of law, from orders passed by the
Appellate Tribunals constituted under the Income Tax Act, the
Customs Act, and the Excise Act deserves to be set aside; it
was the contention of the learned counsel for the respondents,
that the submissions advanced at the hands of the petitioners,
E were premised on an improper understanding of the factual
background. In this behalf, it is sought to be asserted, that the
tax receipts are the primary source of revenue in India. The
Government of India meets its budgetary requirements from
revenue receipts. It is sought to be explained, that tax is
F collected by an established administrative and legal structure.
On the one hand, while fastening of a tax liability would reduce
the profits of an assessee, it would enhance the revenue
receipts of the Government. On the other hand, exemption from
a tax liability would increase profits of an assessee, but would
reduce the revenue receipts of the Government. In view of the
G above profit and loss scenario, administration of tax loss, has
an inherent tendency to result in disputes and litigation. The
process of litigation is primarily based on adoption of innovative
means of interpretation of law, both by the revenue and by the
tax payers. As a result, significant amount of time is spent, on
H long drawn litigation, wherein tax payers and the Government
MADRAS BAR ASSOCIATION v. UNION OF INDIA 111
[JAGDISH SINGH KHEHAR, J.]
'1
lock horns against one another. Naturally, this impacts revenue A
earnings as levy of tax of thousands of crores of rupees,
remains embroiled in such litigation. It was sought to be
pointed out, that as per the Centre for Monitoring Indian
Economy Database, Indian companies have a vast amount
locked in disputed taxes. As per the above report, during the B
Financial Year 2011-2012; 30 companies that make up the
Bombay Stock Exchange sensex, had money locked in
disputed taxes estimated at Rs.42,388 crores. The above
disputed tax liability, according to the learned counsel for the
respondents, was a 27% increase from the amount of the C
preceding year, which was estimated at Rs.33,339 crores.
32. In respect of disputes on direct taxes, it was submitted,
that in a written reply submitted by the Minster of State for
Finance, the Lok Sabha was informed in April, 2012, that
5,943 tax cases were pending with the Supreme Court, and D
30,213 direct tax cases were pending with High Courts. It was
submitted that the Lok Sabha was additionally informed, that
the disputed amount of tax, at various levels, was estimated
at Rs.4,36,741 crores, as on 31.12.2011. It was further sought
to be asserted, that in the preceding year, the estimate in E
respect of the disputed amount at various levels, was to the
tune of Rs.2,43,603 crores. Accordingly it was sought to be
pointed out, that with each succeeding year, not only the tax
related litigation was being progressively enhanced, there was
also a significant increase in the finance blocked in such F
matters.
33. It was likewise pointed out, that the number of cases
involving levy of indirect taxes, projected a similar unfortunate
reflection. In this behalf, it was sought to be pointed out, that G
as on 31.12.2012, the number of pending customs disputes
were approximately 17,800, wherein an amount of
approximately Rs.7,400 crores was involved. Insofar as the
number of pending central excise cases as on 31.10.2012 is
concerned, the figure was approximately 19,800 and the
H
112 SUPREME COURT REPORTS [2014] 10 S.C.R. -
A amount involved was approximately Rs.21,450 crores. By
adding the figures reflected hereinabove, in respect of the
disputes pertaining to indirect taxes, it was suggested that a
total of about 37,600 cases were pending, involving an amount
of approximately Rs.28,850 crores. Additionally it was
B submitted, that out of the 17,800 customs cases, approximately
6,300 cases had been pending for adjudication for periods
ranging from one to three years, and approximately 2,800
customs cases had been pending adjudication for over three
years. Likewise, out of the 19,800 central excise cases, 1,600
c cases were pending for decision for a period between one to
three years; and 240 cases had been pending for decision for
over three years.
34. It was pointed out at the behest of the respondents,
that several reasons contributed to the prolonged continuation
0 of tax disputes. The main reason however was, that there was
a lack of clarity in law in tax litigation. It was submitted, that the
above lack of clarity resulted in multiple interpretations. Added
to that, according to the learned counsel for the respondents,
existence of multiple appellate levels, and independent
E jurisdictional High Courts, resulted in the existence of conflicting
opinions at various appellate forums across the country,
contributing in unfathomable delay and multiplicity of
proceedings.
F 35. Based on the factors narrated above, it was the
submission of the learned counsel for the respondents, that the
burden of high volume of disputes had had the effect of straining
the adjudicatory, as well as, the judicial system. It was pointed
out, that the judicial system was already heavily burdened by
G the weight of significant number of unresolved cases. It was
submitted, that the addition of cases each year, added not only
to the inconvenience of the taxpayer, but also to the revenue
earned by the government. It was pointed out, that the instant
state of affairs crei3ted an uncertain and destabilized business
H environment, with taxpayers not being able to budget, for tax
MADRAS BAR ASSOCIATION v. UNION OF INDIA 113
[JAGDISH SINGH KHEHAR, J.]
costs. Importantly such uncertainty, according to the learned A
counsel, emerged out of the two factors. Firstly, the law itself
was complex, and therefore, uncertain. And secondly, for an
interpretation of the law to achieve a degree of certainty at the
Supreme Court level, required several rounds of litigation. It
was submitted, that in view of the above, the current scenario 8
called for reforms in the dispute resolution mechanism, and the
introduction of, conscious practices and procedures, aimed at
limiting the initiation, as well as, the prolongation of tax
disputes. It is, therefore, the submission of the .learned counsel
for the respondents, that the assertions made at the hands of c
the petitioners, while projecting the first contention, were wholly
misconceived, and as such, are liable to be rejected.
The second contention:
36. In response to the second contention, namely, that it D
is impermissible for the legislature to abrogate the core judicial
appellate functions, traditionally vested with the High Court, or
that it is impermissible to vest the same with an independ~nt,
parallel quasi-judicial hierarchy of tribunals, it was submitted,
that the petitioners 11ad not been able to appreciate the matter E
in its correct perspective. It was pointed out; that the NTT Act
is a legislation which creates an appellate forum, in a hierarchy
of fora, as a remedy for ventilation of grievances emerging out
of taxing statutes. To fully appreciate the purport of the special
remedy created by the statute, the nature of the right and/or F
the liability created by the taxing statutes, and the enforcement
for which these remedies have been provided, needed to be
understood in the correct perspective. Accordingly, in order to
debate the rightful cause, learned counsel drew our r:ttention
to the proposition, in the manner, as was understood by the G
respondents. The submissions advanced in this behalf are
being summarized hereinafter.
37. It was the contention of the learned counsel for the
respondents, that the Income Tax Act, the Customs Act, and
the Excise Act, as also, other taxing statutes create a statutory H
114 SJ.JPREME COURT REPORTS [2014] 10 S.C.R.
A liability. The said statutory liability has no existence, de hors
the statute itself. The said statutory liability, has no existence
in common law. It was further submitted, that it had been long
well settled, that where a right to plead liability had no existence
in common law, but was the creation of a statute, which
B simultaneously provided for a special and particular remedy for
enforcing it, the remedy provided by the statute was bound to
be followed. In respect of such statutory liability, it was not
competent for the party to proceed, by action at common law.
In this behalf, our attention was invited to the observations
c recorded by this Court in Dhu/abhai v. State of M.P. (1968) 3
SCR 662 wherein the Court observed as under:
"9. The question that arises in these appeals has been
before this Court in relation to other statutes and has been
answered in different ways. These appeals went before a
D Divisional Bench of this Court but in view of the difficulty
presented by the earlier rulings of this Court, they were
referred to the Constitution Bench and that is how they are
before us. At the very start we may observe that the
jurisdiction of the Civil Courts is all embracing except to
E the extent it is excluded by an expre.ss provision of law or
by clear intendment arising from such law. This is the
purport of Section 9 of the Code of Civil Procedure. How
Section 9 operates is perhaps best illustrated by referring
to the categories of cases, mentioned by Willes,J. in
F Wolverhampton New Waterworks Co. v.
Hawkesford, [1859] 6 C.B. (NS) 336 - They are :
"One is where there was a liability existing at
common law. and that liability is affirmed by a
statute which gives a special and peculiar form of
G
remedy different from the remedy which existed at
common law: there. unless the statute contains
words which expressly or by necessary implication
exclude the common law remedy the party suing
has his election to pursue either that or the statutory
H
. MADRAS BAR ASSOCIATION v. UNION OF INDIA 115
[JAGDISH SINGH KHEHAR, J.]
remedy. The second class of cases is. where the A
statue gives the right to sue merely, but provides.
no particular form of remedy: there, the party can
only proceed by action at common law. But there
is a third class. viz., where a liability not existing at
common law is created by a statute which at the B
same time gives a special and particular remedy
for enforcing it.. ....... The remedy provided by the
statute must be followed and it is not competent to
the party to pursue the course applicable to cases
of the second class." c
This view of Willes, J. was accepted by the House of Lords
in Neville v. London 'Express' Newspaper Ltd., [1919]
A.C. 368.
)()()( )()()( xxx D
35. Neither of the two cases of Firm of llluri Subayya or
Kamla Mills can be said to run counter to the series of
cases earlier noticed. The result of this inquiry into the
diverse views expressed in this Court may be stated as
E
follows:-
(1) Where the statute gives a finality to the orders
of the special tribunals the Civil Courts' jurisdiction
must be held to be excluded if there is adequate
remedy to do what the Civil Courts would normally F
do in a suit. Such provision, however, does not
exclude those cases where the provisions of the
particular Act have not been complied with or the
statutory tribunal has not acted in conformity with the
fundamental principles of judicial procedure. G
(2) Where there is an express bar of the jurisdiction
of the court. an examination of the scheme of the
particular Act to find the adequacy or the sufficiency
of the remedies provided may be relevant but is not
H
116 SUPREME COURT REPORTS [2014] 10 S.C.R.
A decisive to sustain the jurisdiction of the civil court.
Where there is no express exclusion the
examination of the remedies and the scheme of the
particular Act to find out the intendment becomes
necessary and the result of the inquiry may be
B
decisive. In the latter case it is necessary to see if
the statute creates a special right or a liability and
provides for the determination of the right or liability
and further lays down that all questions about the
said right and liability shall be determined by the
c tribunals so constituted. and whether remedies
normally associated with actions in Civil Courts are
prescribed by the said statue or not.
(3) Challenge to the provisions of the particular Act
D as ultra vires cannot be brought before Tribunals
constituted under that Act. Even the High Court
cannot go into that question on a revision or
reference from the decision of the Tribunals.
(4) When a provision is already declared
E
unconstitutional or the constitutionality of any
provision is to be challenged, a suit is open. A writ
of certiorari may include a direction for refund if the
claim is clearly within the time prescribed by the
Limitation Act but it is not a compulsory remedy to
F replace a suit.
(5) Where the particular Act contains no machinery
for refund of tax collected in excess of constitutional
limits or illegally collected a suit lies.
G
(6) Questions of the correctness of the assessment
apart from its constitutionality are for the decision
of the authorities and a civil suit does not lie if the
orders of the authorities are declared to be final or
there is an express prohibition in the particular Act.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 117
[JAGDISH SINGH KHEHAR, J.]
In either case the scheme of the particular Act must A
be examined because it is a relevant enquiry.
(7) An exclusion of the jurisdiction of the Civil Court
is not readily to be inferred unless the conditions
above set down apply." B
38. In addition to the above submissions, it was sought to
be asserted that the Income Tax Act expressly barred the
jurisdiction of civil courts. Reference in this behalf was made
to Section 293 of the Income Tax Act, which is being extracted
hereunder: C
"293. Bar of suits in civil courts. - No suit shall be brought
in any civil court to set aside or modify any proceeding
taken or order made under this Act. and no prosecution,
suit or other proceeding shall lie against the Government o
or any officer of the Government for anything in good faith
done or intended to be done under this Act."
39. It has been further held by this Court following the
dictum at Barraclough v. Brown ( 1897) AC 615, that if a stattite
confers a right and in the same breath provides for enforcement E
of such right the remedy provided by such a statute is an
exclusive one. Applying this doctrine, in Premier,Automobi/es
v. Kam/ekar Shantaram Wadke, (1976) 1 SCC 496 at 513,
this Court held as under:
F
"23. To sum up, the principles applicable to the jurisdiction
of the Civil Cqurt in relation to an industrial dispute may
be stated thus:
(1) If the dispute is not an industrial dispute. nor does it G
relate to enforcement of any other right under the Act the
remedy lies only in the civil Court.
(2) If the dispute is an industrial dispute arising out of a
right or liability under the general or common law and not
H
118 SUPREME COURT REPORTS [2014] 10 S.C.R.
A under the Act. the jurisdiction of the civil Court is alternative,
leaving it to the election of the suitor concerned to choose
his remedy for the relief which is competent to be granted
in a particular remedy.
(3) If the industrial dispute relates to the enforcement of a
B
right or an obligation created under the Act. then the only
· remedy available to the suitor is to get an adjudication
under the Act.
(4) If the right which is sought to be enforced is a right
c created under the Act such as Chapter VA then the
remedy for its enforcement is either Section 33C or the
raising of an industrial dispute. as the case may be."
In paragraph 12 of the Premier Automobiles case (supra),
. 0 this Court quoted the words of Lord Watson in Barraclough v.
Brown (supra) to the following effect:
"the right and the remedy are given uno flatu and the one
cannot be disassociated from the other"
E 40. It is for this reason, according to learned counsel for
the respondents, that civil courts, even the High Court having
original jurisdiction, would not entertain suits on matters covered
by such special statutes creating rights and providing remedies.
[See Argosam Finance Co. Ltd. v. Oxby (1964) 1 All E.R. 791
F at 796-H].
'The principle underlying those passages seem to me to
be applicable to the present case Section 341 of the
Income Tax Act, 1952, confers the right, the right to an
adjustment tax liability by reference to loss; that right does
G not exist independently of the section; the section uno flatu
in the breath gives a specific remedy and appoints a
specific tribunal for its enforcement, namely the General
Commission or Special Commissioners. In those
circumstances in my judgment, the taxpayer must resort to
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 119
[JAGDISH SINGH KHEHAR, J.]
that remedy and that tribunal. In due course if dissatisfied A
with the decision of the commissioners concerned he can
appeal to the high court by way Case Stated, but any
original jurisdiction of the high court by declaration or
otherwise, is, in my judgment, excluded."
B
The contentions of the petitioners, that substituting Section
260A of the Income Tax Act and divesting the High Court of the
appellate remedy and vesting it in the NTT, is unconstitutional
as it constitutes an inroad into the principles of the rule of law
and independence of judiciary, according to learned counsel,
are fallacious.
c
41. According to the learned counsel for the respondents,
the fallacy in the petitioners' argument is, that they are
overlooking the fact that as far as the NTT Act is concerned, .
there is no common law remedy which has now been divested. D
Section 260A of the Income Tax Act and Section 35(g), (h), (i)
of the Excise Act were all statutorily vested appeals, in the High
Court, and as such, as has been held in the above mentioned
cases can be completely divested. According to learned
counsel, the NTT Act, was on a surer and sounder footing, than E
the provisions of the Companies Act, which came up for
consideration in Union of India v. Madras Bar Association,
(2010) 11 sec 87. Accordingly, as no common law remedy
has been substituted under the present Act, it was submitted,
that the contentions advanced on behalf of the petitioners had F
no legs to stand. Even when the Companies Act set up, the
Company Law Tribunal and the Company Law Appellate
Tribunal, substituting the jurisdiction of the High Courts, this
Court in Union of India v. Madras Bar Association (supra), held
that the said provisions were valid and were not unconstitutional.
G
This Court held as under:
"87. The Constitution contemplates judicial power being
exercised by both courts and tribunals. Except the powers
and jurisdictions vested in superior courts by the
Constitution. powers and jurisdiction of courts are H
.120 ·SUPREME COURT REPORTS [2014] 10 S.C.R.
A controlled and regulated by Legislative enactments. The
High Courts are vested with the jurisdiction to entertain
and hear appeals, revisions and references in pursuance
of provisions contained in several specific legislative
enactments. If jurisdiction of the High Courts can be
B created by providing for appeals. revisions and references
to be heard by the High Courts. jurisdiction can also be
taken away by deleting the provisions for appeals,
revisions or references. It also follows that the legislature
has the power to create tribunals with reference to specific
c enactments and confer jurisdiction on them to decide
disputes in regard to matters arising from such special
enactnients. Therefore it cannot be said that legislature has
no power to transfer judicial functions traditionally
performed by courts to tribunals."
D 88. The argument that there cannot be ''whole-sale transfer
of powers" is misconceived. It is nobody's case that the·
entire functioning of courts in the country is transferred to
tribunals. The competence of the Parliament to make a law
creating tribunals to deal with disputes arising under or
E relating to a particular statute or statutes cannot be
disputed. When a Tribunal is constituted under the
Companies Act, empowered to deal with disputes arising
under the said Act and the statute substitutes the word
"tribunal" in place of "the High Court" necessarily there will
F be "whole-sale transfer" of company law matters to the
tribunals. It is an inevitable consequence of creation of a
tribunal, for such disputes. and will no way affect the validity
of the law creating the tribunal."
G 42. Similarly, statutory provisions providing for a revision
to the District Judge, with the finality clauses, have been
interpreted to exclude the revisionary powers of the High Court
under Section 115 of CPC. In this behalf reference was made
to, Aundal Ammal v. Sadasivan Pilai, (1987) 1 SCC 183,
wherein it was held as under:
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 121
[JAGDISH SINGH KHEHAR, J.]
"15. Under the scheme of the Act it appe.ars that a landlord A
who wants eviction of his tenant has to move for eviction
and the case has to be disposed of by the Rent Control
Court. That is provided by Sub-section(2) of Section 11 of
the Act. From the Rent Control Court, an appeal lies to the
Appellate Authority under the conditions laid down under B
Sub-section (l)(b) of Section 18 of the Act. From the
Appellate Authority a revision in certain circumstances lies
in case where the appellate authority- is a Subordinate
Judge to the District Court and in other cases to the High
Court. In this case as mentioned hereinbefore the appeal c
lay from Rent Control Court to the appellate authority who
was the Subordinate Judge and therefore the revision lay
to the District Judge. Indeed it is indisputed that the
respondent has in this case taken resort to all these
provisions. After the dismissal of the revision by the District D
Judge ,from the appellate decision of the Subordinate
Judge who confirmed the order of the Rent Controller, the
respondent-landlord chose again to go before the High
Court under Section 115 of the CPC. The question, is, can
he have a second revision to the High Court? Shri Poti E
submitted that he cannot. We are of the opinion that he is
right. This position is clear if Sub-section (5) of
Section 18 of the Act is read in conjunction with
Section 20 of the Act. Sub-section (5) of Section 18, as we
have noted hereinbefore, clearly stipulates that the decision
of the appellate authority and subject to such decision, an F
order of the Rent Controller 'shall be final' and 'shall not
be liable to be called in question in any court of law',
except as provided in Section 20. By Section 20, a revision
is provided where the appellate authority is Subordinate
Judge to the District Judge and in other cases, that is to G
say, where the appellate authority is District Judge, to the
High Court. The ambits of revisional powers are well-
settled and need not be re-stated. It is inconceivable to
have two revisions. The scheme of the Act does not
warrant such a conclusion. In our opinion, the expression H
122 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 'shall be final' in the Act means what it says.
20. The learned judge referred to the decision of the
Judicial Committee in the case of Maung Ba Thaw and
Anr.-lnsolvents v. Ma Pin, AIR 1934 PC 81. The learned
judge also referred to a decision of this Court in South
B
Asia Industries (P) Ltd. v. S.B. Sarup Singh and Ors.
(supra). The learned judge concluded that so long as there
was no specific provision in the statute making the
determination by the District Court final and excluding the
supervisory power of the High Court under Section 115 of
c the CPC, it had to be held that the decision rendered by
the District Court under Section 20(1) of the Act being a
decision of a court subordinate to the High Court to which
an appeal lay to the High Court was liable to be revised
by the High Court under Section 115 of th19 CPC. In that
D view of the matter, the Full Bench rejected the view of the
division bench of the Kerala High Court in Kurien v.
Chacko [1960] KLT 1248. With respect, we are unable to
sustain the view of the Full Bench of the High Court on this
aspect of the matter. In our opinion, the Full Bench
E misconstrued the provisions of subsection (5) of
Section 18 of the Act. Sub-section (5) of Section18 clearly
states that such decision of the appellate authority as
mentioned in Section 18 of the Act shall not be liable to
be questioned except in the manner under Section 20 of
F the Act. There was thereby an implied prohibition or
exclusion of a second revision under Section 115 of the
CPC to the High Court when a revision has been provided
under Section 20 of the Act in question. When
Section 18(5) of the Act specifically states that "shall not
G be liable to be called in question in any Court of law"
except in the manner provided under Section 20, it cannot
be said that the High Court which is a court of law and
which is a civil court under the CPC under Section 115 of
the CPC could revise again an order once again after
revision under Section20 of the Act. That would mean
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 123
[JAGDISH SINGH KHEHAR, J.]
there would be a trial by four courts, that would be A
repugnant to the scheme manifest in the different sections
of the Act in question. Public policy or public interest
demands curtailment of law's delay and justice demands
finality within quick disposal of case. The language of the
provisions of Section 18(5) read with Section 20 inhibits B
further revision. The courts must so construe."
Likewise, our attention was invited to Jetha Bai and Sons
v. Sunderdas Rathenai (1988) 1 sec 722, and reliance was
placed on the following:
c
"15. Even without any discussion it may be seen from the
narrative given above that there is really no conflict
between the two decisions because the provisions in the
two Acts are materially different. However, to clarify matters
further we may point put.the differences between the two D
Acts in greater detail and clarity. Under the Kerala Act,
against an order passed by a Rent Control Court presided
over by a District Munsif, the aggrieved party is conferred
a right of appeal under Section 18. The Appellate Authority
has to be a judicial officer not below the rank of a E
subordinate Judge. The appellate Authority has been
conferred powers co-extensive with those of the Rent
Control Court but having over-riding -effect. Having these
factors in mind, the Legislature has declared that in so far
as an order of a Rent Control Court is concerned it shall F
be final subject only to any modification or revision by an
Appellate Authority; and in so far as the Appellate Authority
is concerned, its decision shall be final and shall not be
liable to be called in question in any Court of law except
as provided in Section 20. As regards Section 20, a
division of the powers of revision exercisable thereunder G
has been made between the High Court and the District_
Court. In all those cases where a revision is preferred
against a decision of an Appellate Authority of the rank of
a Subordinate Judge under Section 18, the District Judge
has been constituted the revisional authority. It is only in H
124 SUPREME COURT REPORTS [2014] 10 S.C.R.
A other cases i.e. where the decision sought to be revised
is that of a judicial officer of a higher rank than a
Subordinate Judge, the High Court has been constituted
the Revisional authority. The revisional powers conferred
under Section 20, whether it be on the District Judge or
B the High Court as the case may be are of greater amplitude
than the powers of revision exercisable by a High Court
under Section 115 Code of Civil Procedure Under
Section 20 the Revisional Authority is entitled to satisfy
itself about the legality regularity, or propriety of the orders
c sought to be revised. Not only that, the Appellate Authority
and the Revisional Authority have been expressly conferred
powers of remand under Section 20A of the Act.
Therefore, a party is afforded an opportunity to put forth
his case before the Rent Control Court and then before the
Appellate Authority and there after if need be before the
D
Court of Revision viz. the District Court if the Appellate
Authority is of the rank of a Subordinate Judge. The
Legislature in its wisdom has thought that on account of
the ample opportunity given to a party to put forth his case
before three courts, viz. the Trial Court, the Appellate Court
E and the Revisional Court, there was no need to make the
revisional order of the District Court subject to further
scrutiny by the High Court by means of a second revision
either under the Act or under the Code of Civil Procedure.
It has been pointed out in Aundal Ammal's case (supra)
F that the full Bench of the Kerala High Court had failed to
construe the terms of Section 20 read with Section 18(5) in
their proper perspective and this failing had effected its
conclusion According to the Full Bench, a revisional order
of a District, Court under Section 20 laid itself open for
G further challenge to the High Court under Section115 Code
of Civil Procedure because of two factors viz. (1) there was
no mention in the Act that the order would be final and (2)
there was no provision in the Act for an appeal being filed
against a revisional order under Section 20. The full Bench
H failed to notice certain crucial factors. In the first place,
MADRAS BAR ASSOCIATION v. UNIO~ OF INDIA 125
[JAGDISH SINGH KHEHAR, J.]
Section 20 is a composite section and refers to the A
powers of revision exercisable under that Section by a
District Judge as well as by the High Court. Such being
the case if it is to be taken that an order passed by a
District Court under Section 20 will not have finality
because the Section does not specifically say so, then it B
will follow that a revisional order passed by the High Court
under Section 20 (1) also will not have finality Surely it
cannot be contended by anyone that an order passed by
a High Court in exercise of its powers of revision under
Section 20 (1) can be subjected to further revision c
because Section 20(1) has not expressly conferred finality
to an order passed under that Section. Secondly, the terms
of Section 20 (1) have to be read in conjunction with
Section 18(5). Section 18(5) as already seen, declares
that an order of a Rent Control Court shall be final subject D
to the decision of the Appellate Authority and an order of
an Appellate Authority shall be final and shall not be liable
to be called in question in any court of law except as
provided for in Section 20. When the Legislature has
declared that even an order of the Rent Control Court and
the decision of the Appellate Authority shall be final at their E
respective stages unless the order is modified by the
Appellate Authority or the Revisional Authority as the case
may be, there is no necessity for the legislature to declare
once ever again that an order passed in revision under
Section 20(1) by the District Judge or the High Court as F
the case may be will also have the seal of finality. The third
aspect is that the Legislature has not merely conferred
finality to the decision of an Appellate Authority but has
further laid down that the decision shall not be liable to be
called in question in any court of law except as provided G
for in Section 20. These additional words clearly spell out
the prohibition or exclusion of a second revision under
Section 115 Code of Civil Procedure to the High Court
against a revisional order passed by a District Court under
Section 20 of the Act. This position has been succinctly set H
126 SUPREME COURT REPORTS [2014] 10 S.C.R.
A out in para 20 of the judgment in Aundal Ammal's case
(supra). As was noticed in Vishesh Kumar's case, the
intent behind the bifurcation of the jurisdiction is to reduce
the number of revision petitions filed in the High Court and ·
for determining the legislative intent, the Court must as far
B as possible construe a statute in such a manner as would
advance the object of the legislation and suppress the
mischief sought to be cured by it."
43. Most importantly, a nine-Judge constitution bench
C judgment of this Court, in Mafatlal Industries v. Union of India
(1997) 5 SCC 536, while dealing with the validity of Section
118(3) of the Excise Act, held as follows:
"77. Hereinbefore, we have referred to the provisions
relating to refund obtaining from time to time under the
D Central Excise and Salt Act. Whether it is Rule 11 (as it
stood from time to time) or Section 11-8 (as it obtained
before 1991 or subsequent thereto), they invariably
purported to be exhaustive on the question of refund. Rule
11, as in force prior to August 6, 1977, stated that "no
E duties and charges which have been paid or have been
adjusted ... shall be refunded unless the claimant makes an
application for such refund under his signature and lodges
it to the proper officers within three months from the date
of such payment or adjustment, as the case may be". Rule
F 11, as in force between 6.8.1977 and 17.11.1980
contained Sub-rule (4) which expressly declared : "(4) Save
as otherwise provided by or under this rule, no claim of
refund of any duty shall be entertained". Section 11-B, as
in force prior to April, 1991 contained Sub-section (4) in
identical words. It said : "(4) Save as otherwise provided
G
by or under this Act, no claim for refund of any duty of
excise shall be entertained". Sub-section (5) was more
specific and emphatic. It said:
"Notwithstanding anything contained in any other
H law. the provisions of this Section shall also apply
MADRAS BAR ASSOCIATION v. UNION OF INDIA 127
[JAGDISH SINGH KHEHAR, J.]
to a claim for refund of any amount collected as duty A
of excise made on the ground that the goods in
respect of which such amount was collected were
not excisable or were entitled to exemption from duty
and no court shall have any jurisdiction in respect
of such claim." B
It started with a non-obstante clause; it took in every kind
of refund and every claim for refund and it expressly barred
the jurisdiction of courts in respect of such claim. Sub-
section (3) of Section 11-B, as it now stands, it's to the C
same effect - indeed, more comprehensive and all-
encompassing. It says:
"(3) Notwithstanding anything to the contrary
contained in any judgment. decree. order or
direction of the Appellate Tribunal or any court or D
in any other provision of this Act or the rules made
thereunder or in any law for the time being in force.
no refund shall be made except as provided in sub-
section".
E
The language could not have been more specific and
emphatic. The exclusivity of the provision relating to refund
is not only express and unambiguous but is in addition to
the general bar arising from the fact that the Act creates
new rights and liabilities and also provides forums and
F
procedures for ascertaining and adjudicating those rights
and liabilities and all other incidental and ancillary matters.
as will be pointed out presently. This is a bar upon a bar -
an aspect emphasised in Para 23 (supra). and has to be
respected so long as it stands. The validity of these
provisions has never been seriously doubted. Even though G
in certain writ petitions now before us, validity of the 1991
(Amendment) Act including the amended Section 11-B is
questioned, no specific reasons have been assigned why
a provision of the nature of Sub-section (3) of Section11-
B (amended) is unconstitutional. Applying the propositions H
128 SUPREME COURT REPORTS [2014) 10 S.C.R.
A enunciated by a seven-Judge Bench of this Court in
Kamala Mills case, AIR 1965 SC 1942, it must be held
that Section 11-B (both before and after amendment) is
valid and constitutional. In Kamala Mills, this Court upheld
the constitutional validity of Section 20 of the Bombay
B Sales Tax Act (set out hereinbefore) on the ground that the
Bombay Act contained adequate provisions for refund, for
appeal, revision, rectification of mistake and for
condonation of delay in filing appeal/revision. The Court
pointed out that had the Bombay Act not provided these
c remedies and yet barred the resort to civil. court. the
constitutionality of Section 20 may have been in serious
doubt. but since it does provide such remedies. its validity
was beyond challenge. to repeat - and it is necessary to
do so - so long as Section 11-B is constitutionally valid. it
has to be followed and given effect to. We can see no
D
reason on which the co_nstitutionality of the said provision
- or a similar provision - can be doubted. It must also be
remembered that Central Excises and Salt Act is a special~
enactment creating new and special obligations and rights.
which at the same time prescribes the procedure for levv.
E assessment. collection, refund and all other incidental and
ancillary provisions. As pointed out in the Statement of
Objects and Reasons appended to the Bill which became
the Act, the Act along with the Rules was intended to "form
a complete central excise code". The idea was "to
F consolidate in a single enactment all the laws relating to
central duties of excise". The Act is a self-contained
enactment. It contains provisions for collecting the taxes
which are due according to law but have not been collected
and also for refunding the taxes which have been collected
G contrary to law, viz., Sections 11-A and 11-B and its allied
provisions. Both provisions contain a uniform rule of
limitation, viz., six months, with an exception in each case.
Sections 11-A and 11-B are complimentary to each other.
To such a situation, Proposition No. 3 enunciated in
H Kamala Mills becomes applicable, viz., where a statute
MADRAS BAR ASSOCIATION v. UNION OF INDIA 129
[JAGDISH SINGH KHEHAR, J.]
creates a special right or a liability and also provides the A
procedure for the determination of the right or liability by
the Tribunals constituted in that behalf and provides further
that all questions about the said right and liability shall be
determined by the Tribunals so constituted, the resort to
civil court is not available -except to the limited extent B
pointed out in Kamala Mills. Central Excise Act specifically
provides for refund. lt expressly declares that no refund
shall be made except in accordance therewith. The
jurisdiction of a civil Court is expressly barred - vide Sub-
section (5) of Section 11-B, prior to its amendment in c
1991, and Sub-section (3) of Section 11-B, as amended
in 1991. It is relevant to notice that the Act provides for
more than one appeal against the orders made under
Section 11-B/Rule 11. Since 1981. an appeal is provided
to this Court also from the orders of the Tribunal. While 0
Tribunal is not a departmental organ. this Court is a civil
court. In this view of the matter and the express and
additional bar and exclusivity contained in Rule 11/
Section 11-8. at all points of time. it must be held that any
and every ground including the violation of the principles
E
of natural justice and infraction of fundamental principles
of judicial procedure can be urged in these appeals.
obviating the necessity of a suit or a writ petition in matters
relating to refund. Once the constitutionality of the
provisions of the Act including the provisions relating to
refund is beyond question. they constitute "law" within the F
meaning of Article 265 of the Constitution. It follows that
any action taken under and in accordance with the said
provisions would be an action taken under the "authority
of law'', within the meaning of Article 265. In the face of the
express provision which expressly declares that'lio claim · G
for refund of any duty shall be entertained except in
accordance with the said provisions. it is not permissible
to resort to Section 72 of the Contract Act to do precisely
that which is expressly prohibited by the said provisions.
In other words. it is not permissible to claim refund by H
130 SUPREME COURT REPORTS [2014] 10 S.C.R.
A invoking Section 72 as a separate and independent
remedy when such a course is expressly barred by the
provisions in the Act. viz., Rule 11.and Section 11-8. For
this reason. a suit for refund would also not lie. Taking any
other view would amount to nullifying the provisions in Rule
8 11/Section 11-8, which, it needs no emphasis, cannot be
done. It, therefore, follows that any and every claim for
refund of excise duty can be made only under and in
accordance with Rule 11 or Section 11-8, as the case may
be, in the forums provided by the Act. No suit can be filed
c for refund of duty invoking Section 72 of the Contract Act.
So far as the jurisdiction of the High Court under
Article 226 - or for that matter. the jurisdiction of this Court
under Article 32 - is concerned. it is obvious that the
provisions of the Act cannot bar and curtail these
D remedies. It is. however. equally obvious that while
exercising the power under Article 226/Article 32. the Court
would certainly take note of the legislative intent manifested
in the provisions of the Act and would exercise their
jurisdiction consistent with the provisions of the enactment."
E It was submitted, that a perusal of the above paragraph shows,
that this Court noticed, that against the order of the tribunal an
appeal was provided for to this Court. The Court declared, that
the tribunal was not a departmental organ and the Supreme
Court was a civil court as it was hearing a l::itatutory appeal.
F More importantly it held, that every ground including violation
and infraction of judicial procedure could be urged in these
appeals, obviating the necessity of a suit or a writ petition in
matters relating to refund. This Court took care to hold, that so
far as the jurisdiction of High Courts under Article 226 or this
G Court under Article 32 are concerned, they cannot be curtailed.
It further held, that it was equally obvious that while exercising
the power under Article 226/32 the Court would certainly take
note of the legislative intent manifested in the provisions of the
Act and would exercise their jurisdiction consistent with the
H provisions of the enactment. It was accordingly submitted, that
MADRAS BAR ASSOCIATION v. UNION OF INDIA 131
[JAGDISH SINGH KHEHAR, J.]
in view of the conclusions drawn, in the above judgment, all the A
contentions urged by the petitioners, needed to be rejected.
The third contention:
44. Learned counsel for the respondents, vehemently
controverted the submissions advanced at the hands of the B
petitioners, that the NTI Act was ultra vires the provisions of
the Constitution. Insofar as the instant aspect of the matter is
concerned, learned counsel for the respondents, first placed
reliance on Article 246 of the Constitution. Article 246 is being
extracted hereunder: C
"246. Subject-matter of laws made by Parliament and by
the Legislatures of States - (1)
Notwithstanding anything in clauses (2) and (3), Parliament
has exclusive power to make laws with respect to any of 0
the matters enumerated in List I in the Seventh Schedule
(in this Constitution referred to as the "Union List").
(2) Notwithstanding anything in clause (3), Parliament and,
subject to clause (1 ), the Legislature of any State also,
have power to make laws with respect to any of the matters E
enumerated in List Ill in the Seventh Schedule (in this
Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature of any
State has exclusive power to make laws for such State or F
any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule (in this
Constitution referred to as the 'State List').
(4) Parliament has power to make laws with respect to
any matter for any part of the territory of India not included G
(in a State) notwithstanding that such matter is a matter
enumerated in the State List."
Based on the aforesaid provision, it was sought to be
asserted that the Parliament had the unqualified and absolute H
132 SUPREME COURT REPORTS [2014] 10 S.C.R.
A jurisdiction, power and authority to enact laws in respect of
matters enumerated in Lists I and Ill of the Constitution.
A'Sditionally, placing reliance on Article 246(4), it was asserted,
that even on subjects not expressly provided for in the three
Lists of the Seventh Schedule to the Constitution, the
B Parliament still had the absolute and untrammeled right to enact
legislation. Insofar as the instant aspect of the matter is
concerned, learned counsel for the respondents placed reliance
on entries 77 to 79, 82 to 84, 95 and 97 of List I. The above
entries are being extracted hereunder:
c List I - Union List
"77. Constitution, organisation, jurisdiction and powers of
the Supreme Court (including contempt of such Court), and
.the fees taken therein; persons entitled to practise before
D the Supreme Court. ·
78. Constitution and organisation (including vacations) of
the High Courts except provisions as to officers and
servants of High Courts; persons entitled to practise before
the High Courts.
E
79. Extension of the jurisdiction of a High Court to, and
exclusion of the jurisdiction of a High Court from, any Union
territory.
F 82. Taxes on income other than agricultural income.
83. Duties of customs including export duties.
84. Duties of excise on tobacco and other goods
manufactured or produced in India except -
G
(a) alcoholic liquors for human consumption.
{b) opium, Indian hemp and other narcotic drugs and
narcotics,
H but including medicinal and toilet preparations containing
MADRAS BAR ASSOCIATION v. UNION OF INDIA 133
[JAGDISH SINGH KHEHAR, J.]
alcohol or any substance included in sub-paragraph (b) of A
this entry.
95. Jurisdiction and powers of all courts, except the
Supreme Court, with respect to any of the matters in this
List; admiralty jurisdiction. B
97. Any other matter not enumerated in List II or List Ill
including any tax not mentioned in either of those Lists."
Based on the entries reproduced hereinabove, especially
entries 77 to 79, it was submitted, that Parliament had the c
jurisdiction to enact legislation even in respect of the Supreme
Court and the High Courts. Additionally, it had the power to
legislate, and thereby, to extend or exclude the jurisdiction of a
High Court. Relying on entries 82 to 84, it was the submission
of the learned counsel for the respondents, that on matters of D
income-tax, customs duty and excise duty, the power to legislate
was unequivocally vested with. the Parliament. Reliance was
placed on entry 95, to contend, that the extent of the jurisdiction
of all courts including the High Court, in respect of matters
expressed in List I could also be laid down by the Parliament. E
Referring again to entries 82 to 84 it was submitted, that the
extension or exclusion of jurisdiction on tax matters, was also
within the domain of Parliament. So as to assert, that in case
this Court was of the view, that the subject of the legislation
contained in the NTT Act did not find mention, in any of the three
F
Lists of the Seventh Schedule of the Constitution, the
submission on behalf of the respondents was, that Parliament
would still have the authority to legislate thereon, under entry
97 contained in List I of the Seventh Schedule.
45. Learned counsel for the respondents, also placed G
reliance on entries 11A and 46 contained in List Ill of Seventh
Schedule. The above entries are being extracted hereunder:
List Ill - Concurrent List
"11A. Administration of justice; constitution and H
134 SUPREME COURT REPORTS [2014] 10 S.C.R.
A organisation of all courts, except the Supreme: Court and
the High Courts.
xxx xxx xxx
46. Jurisdiction and powers of all courts, except the
B Supreme Court, with respect to any of the matters in this
List."
Referring to the above entries, it was the contention of the
learned counsel for the respondents that Parliament had the
c authority to enact legislation, in respect of the extent of
jurisdiction and powers of courts, including the High Court. It
was, however pointed out, that this power extended only to such
matters and subjects, that found mention in List Ill of the Seventh
Schedule. It was,.therefore, that reliance was placed on entry
0 11A in List Ill, to contend that administration of justice,
constitution and organization of all c0urts (except the Supreme
Court and the High Courts) would lead to the inevitable
conclusion that the NTT Act was promulgated, well within the
power vested with the Parliament, under Article 246(2) of the
E Constitution.
46. Additionally, reliance was placed by the learned
counsel for the respondents, on Article 247 of the Constitution,
which is reproduced hereunder:
F "247. Power of Parliament to provide for the establishment
of certain additional courts. - Notwithstanding anything in
this Chapter, Parliament may by law provide for the.
establishment of any additional courts for the better
administration of laws made by Parliament or of any
G existing laws with respect to a matter enumerated in the
Union List."
Referring to the above provision, it was the assertion of the
learned counsel for the respondents, that power was expressly
'Vested with the Parliament, to establish additional courts, for
H better administration of laws. It was submitted, that this was
MADRAS BAR ASSOCIATION v. UNION OF INDIA 135
[JAGDISH SINGH KHEHAR, J.]
exactly what the Parliament had chosen to do, while enacting A
the NTT Act. Referring to the objects and reasons, indicating
the basis of the enactment of the NTT Act, it was the categoric
assertion at the hands of the learned counsel, that the
impugned enactment was promulgated with the clear
understanding, that the NTT would provide better adjudication B
of legal issues, arising out of direct/indirect tax laws.
47. Besides Articles 246 and 247 of the Constitution,
learned counsel for the respondents asserted, that Articles
323A and 323B were inserted into the Constitution, by the C
Constitution (Forty-second Amendment) Act, 1976. The above
provisions were included in the newly enacted Part XIV A of
the Constitution. It was asse~. that the instant amendment
of the Constitution ~-made for achieving two objectives.
Firstly, to exclude the power of judicial review of the High Courts
and the Supreme Court, totally. Thus excluding judicial review 0
in its entirety. And secondly, to create independent specialized
tribunals, with power of judicial review, which would ease the
burden of the High Courts and the Supreme Court. It was
however acknowledged by learned counsel representing the
respondents, that the first of.the above mentioned objectives, E
was interpreted by this Court in L. Chandra Kumar v. Union of
India (1997) 3 SCC 261, which struck down clause (2)(d) of
Article 323A and clause (3)(d) of Article 323B, to the extent the
amended provisions introduced by the Forty-second
Amendment to the Constitution, excluded the jurisdiction of the F
High Courts and the Supreme Court under Articles 226/227 and
32/136 respectively. Insofar as the second objective is
concerned, placing reliance in L. Chandra Kumar case (supra),
it was the contention of the learned counsel for the respondents,
that this Court had clearly concluded, that as long as the power G
of judicial review continue with the High Courts and the
Supreme Court, under the provisions referred to hereinabove,
the enactment under reference would be constitutionally valid.
Therefore, in response to the submissions advanced at the
hands of the learned counsel for the petitioners (as have been H
136 SUPREME COURT REPORTS [2014] 10 S.C.R.
A noticed hereinabove), it was the contention of the learned
counsel for the respondents, that the power to enact the NTT
Act, was clearly vested with the Parliament even under Article
3238 of the Constitution. Furthermore, since the impugned
enactment did not exclude the jurisdiction of the High Courts
B under Articles 226 and 227 of the Constitution, and also, did
not exclude the jurisdiction of the Supreme Court under Articles
32 and 136 of the Constitution, the challenge to the
constitutional validity of the NTT Act was wholly unjustified.
48. Learned counsel for the respondents was at pains to
C emphasise, that the jurisdictional road of Courts, as final
interpreter of the law, was clearly preserved. Firstly, because
a statutory appeal was provided for under the NTT Act to the
Supreme Court. And secondly because, judicial review vested
in the High Courts under Articles 226 and 227 of the
D Constitution, and in the Supreme Court under Articles 32 and
136 of the Constitution, had been kept intact. It is, therefore,
the submission of the learned counsel for the respondenJs, that
no fault can be found in the vesting of appellate jurisdiction from
orders passed by Appellate Tribunals (constituted under the
E Income Tax Act, Customs Act and the Excise Act) with the NTI.
49. While acknowledging the fact, that the jurisdiction
vested in the High Courts to hear appeals from the Appellate
Tribunals, under the Income Tax Act (vide Section 260A), the
F Customs Act (vide Section 130), and the Excise Act (vide
Section 35G), has been transferred from the jurisdictional High
Court to the NTT, it was submitted that appellate jurisdiction
vested in a High Court under a statute, could be taken away
by an amendment of the statute. Stated simply, the submission
at the behest of the respondents was, whatever is vested by a
G statutory enactment, can likewise be divested in the same
manner. It was therefore sought to be asserted, that the
grounds of challenge to the NTT Act raised, at the behest of
the petitioners, were misconceived and unacceptable.
r1 50. Besides the submissions noticed hereinabove, it was
-
MADRAS BAR ASSOCIATION v. UNION OF INDIA 137
[JAGDISH SINGH KHEHAR, J.]
also contended on behalf of the respondents, that the assertion A
made by the petitioners, that appellate jurisdiction on
"substantial questions of law" could not be vested with the NTT,
was fallacious. In this behalf, it was sought to be reiterated, that
jurisdiction of civil courts (including the original side of the High
Court) was barred in respect oftax related issues. It was sought B
to be explained, that a case could involve questions of fact, as
well as, questions of law right from the stage of the initial'
adjudicatory authority. But, it was pointed out, that only cases
involving ''substantial questions of law" would qualify for
adjudication at the hands of the NTT. As such, placing reliance c
on the decision in Mafatlal Industries Ltd. v. Union of India
(1997) 5 SCC 536, it was submitted, that the above contention
raised by the petitioners had no legs to stand. Furthermore, it
was sought to be pointed out, that the phrase "substantial
questions of law" has been interpreted by this Court to mean, D
not only questions of general pubic importance, but also
questions which would directly and substantially affect the rights
of the parties to the litigation. It was also asserted, that a
question of law would also include, a legal issue not previously
settled, subject to the condition, that it had a material bearing
E
on the determination of the controversy to be settled, between
the parties. It is accordingly contended, that no limited
interpretation could be placed on the term "substantial
questions of law". Accordingly, it was submitted, that a
challenge to the constitution of the NTT on the premise that the
NTT was vested with the jurisdiction to settle "substantial F
questions of law" was unsustainable.
51. In order to support his above submission, learned
counsel for the respondents placed emphatic reliance on a few
judgments rendered by this Court. The same are being noticed G
hereunder:
(i) Reliance was also placed on L. Chandra ;;;;,. v.
Union of India, (1997) 3 sec 261. Learned CULlilSf. .. ,r:.'~
respondents, while relying on the instant judgment. rr;adc· <
reference to various observations recorded therein. ··NP "'1'' '
-
138 SUPREME COURT REPORTS [2014] 10 S.C.R.
A . to incorporate hereunder all the paragraphs on which reliance
was placed by the learned counsel:-
"80. However. it is important to emphasise that though the
subordinate judiciary or Tribunals created under ordinary
legislations cannot exercise the power of judicial review
B
of legislative action to the exclusion of the High Courts and
the Supreme Court. there is no constitutional prohibition
against their performing a supplemental - as opposed to
a substitutional - role in this respect. That such a situation
is contemplated within the constitutional scheme becomes
c evident when one analyses clause (3) of Article 32 of the
Constitution which reads as under:
"32. Remedies for enforcement of rights conferred by this
Part.-
D
(1) .. .
(2) .. .
(3) Without prejudice to the powers conferred on the
E Supreme Court by clauses (1) and (2), Parliament may
bv law empower any other court to exercise within the
local limits of its jurisdiction all or any of the powers
exercisable by the Supreme Court under clause (2)."
81. If the power under Article 32 of the Constitution, which
F has been described as the "heart" and "soul" of the
Constitution. can be additionally conferred upon "any other
court". there is no reason why the same situation cannot
subsist in respect of the jurisdiction conferred upon the
High Courts under Article 226 of the Constitution. So long
G as the jurisdiction of the High Courts under Articles 226/
227 and that of this Court under Article 32 is retained.
there is no reason why the power to test the validity of
legislations against the provisions of the Constitution
cannot be conferred upon Administrative Tribunals created
H under the Act or upon Tribunals created under Article 323-
MADRAS BAR ASSOCIATION v. UNION OF INDIA 139
[JAGDISH SINGH KHEHAR, J.]
B of the Constitution. It is to be remembered that. apart A
from the authorisation that flows from Articles 323-A and
323-B. both Parliament and the State Legislatures
possess legislative competence to effect changes in the
original jurisdiction of the Supreme Court and the High
Courts. This power is available to Parliament under Entries B
77. 78. 79 and 95 of List I and to the State Legislatures
under Entry 65 of List II: Entry 46 of List Ill can also be
availed of both by Parliament and the State Legislatures
for this purpose.
82. There are pressing reasons why we are anxious to c
preserve the conferment of such a power on these
Tribunals. When the Framers of our Constitution bestowed
the powers of judicial review of legislative action upon the
High Courts and the Supreme Court, they ensured that
other constitutional safeguards were created to assist D
them in effectively discharging this onerous burden. The
expectation was that this power would be required to be
used only occasionally. However, in the five decades that
have ensued since Independence, the quantity of litigation
before the High Courts has exploded in an unprecedented E
manner. The decision in Sampath Kumar's case, AIR
1987 SC 386, was rendered against such a backdrop. We
are conscious of the fact that when a Constitution Bench
of this Court in Sampath Kumar's case (supra) adopted
the theory of alternative institutional mechanisms, it was F
attempting to remedy an alarming practical situation and
the approach selected by it appeared to be most
appropriate to meet the exigencies of the time. Nearly a
decade later, we are now in a position to review the
theoretical and practical results that have arisen as a G
consequence of the adoption of such an approach.
83. We must, at this stage, focus upon the factual position
which occasioned the adoption of the theory of alternative
institutional mechanisms in Sampath Kumar's case
(supra). In his leading judgment, R. Misra, J. refers to the H
140 SUPREME COURT REPORTS [2014] 10 S.C.R.
A fact that since Independence, the population explosion and
the increase in litigation had greatly increased the burden
of pendency in the High Courts. Reference was made to
studi.es conducted towards relieving the High Courts of
their increased load. In this regard, the recommendations
B of the Shah Committee for setting up independent
Tribunals as also the suggestion of the Administrative
Reforms Commission that Civil Service Tribunals be set
up, were noted. Reference was also made to the decision
in K.K. Dutta v. Union of India, (1980) 4 SCC 38, where
c this Court had, while emphasising the need for speedy
resolution of service disputes, proposed the establishment
of Service Tribunals.
· 84. The problem of clearing the backlogs of High Courts,
which has reached colossal proportions in our times is,
D nevertheless, one that has been the focus of study for close
to a half century. Over time, several Expert Committees
and Commissions have analysed the intricacies involved
and have made suggestions, not all of which have been
consistent. Of the several studies that have been
E conducted in this regard, as many as twelve have been
undertaken by the Law Commission of India (hereinafter
referred to as "the LCI") or similar high-level committees
appointed by the Central Government, and are particularly
noteworthy. (Report of the High Court Arrears Committee,
F 1949; LCI, 14th Report on Reform of Judicial
Administration (1958); LCI, 27th Report on Code of Civil
Procedure, 1908 (1964); LCI, 41st Report on Code of
Criminal Procedure, 1898 (1969); LCI, 54th Report of
Code of Civil Procedure, 1908 (1973); LCI, 57th Report
G on Structure and Jurisdiction of the Higher Judiciary
(1974); Report of High Court Arrears Committee, 1972;
LCI, 79th Report on Delay and Arrears in High Courts and
other Appellate Courts (1979); LCI, 99th Report on Oral
Arguments and Written Arguments in the Higher Courts
(1984); Satish Chandra's Committee Report 1986; LCI,
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 141
[JAGDISH SINGH KHEHAR, J.]
124th Report on the High Court Arrears - A Fresh Look A
(1988); Report of the Arrears Committee (1989-90).
85. An appraisal of the daunting task which confronts the
High Courts can be made by referring to the assessment
undertaken by the LCI in its 124th Report which was
B
released sometime after the judgment in Sampath
Kumar's case (supra). The Report was delivered in 1988,
nine years ago, and some changes have occurred since,
but the broad perspective which emerges is still, by and
large, true:
c
"... The High Courts enjoy civil as well as criminal,
ordinary as well as extraordinary, and general as
well as special jurisdiction. The source of the
jurisdiction is the Constitution and the various
statutes as well as letters patent and other D
instruments constituting the High Courts. The High
Courts in the country enjoy an original jurisdiction
in respect of testamentary, matrimonial and
guardianship matters. Original jurisdiction is
conferred on the High Courts under the E
Representation of the People Act, 1951,
Companies Act, 1956, and several other special
. statutes. The High Courts, being courts of record,
have the power to punish for its contempt as well
as contempt of its subordinate courts. The High
F
Courts enjoy extraordinary jurisdiction under
Articles 226 and 227 of the Constitution enabling
it to issue prerogative writs, such as, the one in the
nature of habeas corpus, mandamus, prohibition,
quo warranto and certiorari. Over and above this,
G
the High Courts of Bombay, Calcutta, Delhi,
Himachal Pradesh, Jammu and Kashmir and
Madras also exercise ordinary original civil
jurisdiction. The High Courts also enjoy advisory
jurisdiction, as evidenced by Section 256 of the
Indian Companies Act, 1956, Section 27 of the H
142 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Wealth Tax Act, 1957, Section 26 of the Gift Tax Act,
1958, and Section 18 of the Companies (Profits)
Surtax Act, 1964. Similarly, there are parallel
provisions conferring advisory jurisdiction on the
High Courts, such as, Section 130 of the Customs
B Act, 1962, and Section 354 of the Cent~al Excises
and Salt Act, 1944. The High Courts have also
enjoyed jurisdiction under the Indian Divorce Act,
1869, and the Parsi Marriage and Divorce Act,
1936. Different types of litigation coming before the
c High Court in exercise of its wide jurisdiction bear
different names. The vast area of jurisdiction can
be appreciated by reference to those names, viz.,
(a) first appeals; (b) appeals under the letters
patent; (c) second appeals; (d) revision petitions;
(e) criminal appeals; (f) criminal revisions; (g) civil
D
and criminal references; (h) writ petitions; (1) writ
appeals; (J) references under direct and indirect tax
laws; (k) matters arising under the Sales Tax Act;
(/) election petitions under the Representation of the
People Act; (m) petitions under the Companies
E Act, Banking Companies Act and other special
Acts and (n) wherever the High Court has original
jurisdiction, suits and other proceedings in exercise
of that jurisdiction. This varied jurisdiction has to
some extent been responsible for a very heavy
F institution of matters in the High Courts."
86. After analysing the situation existing in the High Courts
at length, the LCI made specific recommendations towards
the establishment of specialist Tribunals thereby lending
G force to the approach adopted in Sampath Kumar's case
(supra). The LCI noted the erstwhile international judicial
trend which pointed towards generalist courts yielding their
place to specialist Tribunals. Describing the pendency in
the High Courts as "catastrophic, crisis-ridden, almost
unmanageable, imposing ... an immeasurable burden on
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 143
[JAGDISH SINGH KHEHAR, J.]
the system", the LCI stated that the prevailing view in A
Indian Jurisprudence that the jurisdiction enjoyed by the
High Court is a holy cow required a review. It, therefore,
recommended the trimming of the jurisdiction of the High
Courts by setting up specialist courts/Tribunals while
simultaneously eliminating the jurisdiction of the High B
Courts.
87. It is important to realise that though the theory of
alternative institutional mechanisms was propounded in
Sampath Kumar's case (supra) in respect of the
Administrative Tribunals, the concept itself - that of C
creating alternative modes of dispute resolution which
would relieve High Courts of their burden while
simultaneously providing specialised justice - is not new.
In fact, the issue of having a specialised tax court has been
discussed for several decades; though the Report of the D
High Court Arrears Committee (1972) dismissed it as "ill-
conceived", the LCI, in its 115th Report (1986) revived the
recommendation of setting up separate Central Tax
Courts. Similarly, other Reports of the LCI have suggested
the setting up of 'Gram Nyayalayas' [LCI, 114th Report E
(1986)], Industrial/Labour Tribunals [LCI, 122nd Report
(1987)] and Education Tribunals [LCI, 123rd Report
(1987)].
88. In R.K. Jain's case. (1993) AIR SCW 1899, this Court
F
had, in order to understand how the theory of alternative
institutional mechanisms had functioned in practice.
recommended that the LCI or a similar expert body should
conduct a survey of the functioning of these Tribunals. It was
hoped that such a study. conducted after gauging the
working of the Tribunals over a sizeable period of more G
than five years would provide an answer to the questions
posed by the critics of the theorv. Unfortunately, we do not
have the benefit of such a study. We may, however, advert
to· the Report of the Arrears Committee (1989-90),
popularly known as the Malimath Committee Report. which H
144 SUPREME COURT REPORTS [2014] 10 S.C.R.
A has elaborately dealt with the aspect. The observations
contained in the Report. to this extent they contain a review
of the functioning of the Tribunals over a period of three
years or so after their institution. will be useful for our
purpose. Chapter VIII of the second volume of the Report,
B "Alternative Modes and Forums for Dispute Resolution",
deals with the issue at length. After forwarding its specific
recommendations on the feasibility of setting up 'Gram
Nyayalayas', Industrial Tribunals and Educational Tribunals,
the Committee has dealt with the issue of Tribunals set up
c under Articles. 323-A and 323-8 of the Constitution. The
relevant observations in this regard, being of considerable
significance to our analysis, are extracted in. full as under:
"Functioning of Tribunals
D 8.63 Several tribunals are functioning in the countrv.
Not all of them. however, have inspired confidence
in the public mind. The reasons are not far to seek.
The foremost is the lack of competence.
objectivity and judicial approach. The next is their
E constitution. the power and method of appointment
of personnel thereto. the inferior status and the
casual method of working. The last is their actual
composition: men of calibre are not willing to be
appointed as presiding officers in view of the
F uncertainty of tenure. unsatisfactory conditions of
service. executive subordination in matters of
administration and political interference in judicial
functioning. For these and other reasons, the
quality of justice is stated to have suffered and the
cause of expedition is not found to have been
G
served by the establishment of such tribunals.
8.64 Even the experiment of setting up of the
Administrative Tribunals under the Administrative
Tribunals Act, 1985, has not been widely welcomed.
H Its members have been selected from all kinds of
MADRAS BAR ASSOCIATION v. UNION OF INDIA 145
[JAGDISH SINGH KHEHAR, J.]
services including the Indian Police Service. The A
decision of the State Administrative Tribunals are
not appealable, except under Article 136 of the
Constitution. On account of the heavy cost and
remoteness of the forum, there is virtual negation
of the right of appeal. This has led to denial of B
justice in many cases and consequential
dissatisfaction. There appears to be a move in
some of the States where they have been
established for their abolition.
Tribunals - Tests for Including High Court's C
· Jurisdiction
8.65 A Tribunal which substitutes the High Court as
an alternative institutional mechanism for judicial
review must be no less efficacious than the High D
Court. Such a tribunal must inspire confidence and
public esteem that it is a highly competent and
expert mechanism with judicial approach and
objectivitv. What is needed in a tribunal. which is
intended to supplant the High Court. is legal E
training and experience. and judicial acumen.
equipment and approach. When such a tribunal is
composed of personnel drawn from the judiciary as
well as from services or from amongst experts in
the field. any weightage in favour of the service
F
members or expert members and value-
discounting the judicial members would render the
tribunal less effective and efficacious than the High
Court. The Act setting up such a tribunal would itself
have to be declared as void under such
circumstances. The same would not at all be G
conducive to judicial independence and may even
tend, directly or indirectly, to influence their
decision-making process, especially when the
Government is a litigant in most of the cases
coming before such tribunal. (See S.P. Sampath H
146 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Kumar's case (supra)). The protagonists of
specialist tribunals, who simultaneously with their
establishment want exclusion of the writ jurisdiction
of the High Courts in regard to matters entrusted
for adjudication to such tribunals, ought not to
B overlook these vital and important aspects. It must
not be forgotten that what is permissible to be
supplanted by another equally effective and
efficacious institutional mechanism is the High
Courts and not the judicial review itself. Tribunals
c are not an end in themselves but a means to an
end; even if the laudable objectives of speedy
justice, uniformity of approach, predictability of
decisions and specialist justice are to be achieved,
the framework of the tribunal intended to be set up
to attain them must still retain its basic judicial
D
character and inspire public confidence. Any
scheme of decentralisation of administration of
justice providing for an alternative institutional
mechanism in substitution of the High Courts must
pass the aforesaid test in order to be constitutionally
E valid.
8.66 The overall picture regarding the tribunalisation
of justice in our country is not satisfactorv and
encouraging. There is a need for a fresh look and
F review and a serious consideration before the
experiment is extended to new areas of fields.
especially if the constitutional jurisdiction of the
High Courts is to be simultaneously ousted. Not
many tribunals satisfying the aforesaid tests can
G possibly be established."
Having expressed itself in this manner, the Malimath
Committee specifically recommended that the theory of
alternative institutional mechanisms be abandoned.
Instead, it recommended that institutional changes be
H carried out within the High Courts, dividing ,them into
MADRAS BAR ASSOCIATION v. UNION OF INDIA 147
[JAGDISH SINGH KHEHAR, J.]
separate divisions for different branches of law, as is being A
done in England. It stated that appointing more Judges to
man the separate divisions while using the existing
infrastructure would be a better way of remedying the
problem of pendency in the High Courts.
89. In the years that have passed since the Report of the 8
Malimath Committee was delivered, the pendency in the
High Courts has substantially increased and we are of the
view that its recommendation is not suited to our present
context. That the various Tribunals have not performed up
to expectations is a self-evident and widely acknowledged C
truth. However. to draw an inference that their unsatisfactory
performance points to their being founded on a
fundamentally unsound principle would not be correct. The
reasons for which the Tribunals, were constituted still
persist; indeed. those reasons have become even more D
pronounced in our times. We have already indicated that
our constitutional scheme permits the setting up of such
Tribunals. However. drastic measures may have to be
resorted to in order to elevate their standards to ensure
that they stand up to constitutional scrutiny in the discharge E
of the power of judicial review conferred upon them.
~O. We may first address the issue of exclusion of the
power of judicial review of the High Courts. We have
already held that in respect of the power of judicial review. F
the jurisdiction of the High Courts under Articles 226/227
cannot be excluded. It has been contended before us that
the Tribunals should not be allowed to adjudicate upon
matters where the vires of legislations is questioned. and
that they should restrict themselves to handling matters
where constitutional issues are not raised. We cannot bring G
ourselves to agree to this proposition as that may result
in splitting up proceedings and may cause avoidable
delay. If such a view were to be adopted. it would be open
for litigants to raise constitutional issues, many of which
may be quite frivolous, to directly approach the High Courts H
148 SUPREME COURT REPORTS [2014] 10 S.C.R.
A and thus subvert the jurisdiction of the Tribunals. Moreover.
even in these special branches of law. some areas do
involve the consideration of constitutional questions on a
regular basis; for instance. in service law matters. a large
majority of cases involve an interpretation of Articles 14.
B 15 and 16 ()f the Constitution. To hold that the Tribunals
have no power to handle matters involving constitutional
issues would not serve the purpose for which they were
constituted. On the other hand. to hold that all such
decisions will be subject to the jurisdiction of the High
c Courts under Articles 226/227 of the Constitution before
a Division Bench of the High Court within whose territorial
jurisdiction the Tribunal concerned falls will serve two
purposes. While saving the power of judicial review of
legislative action vested in the High Courts under Articles
226/227 of the Constitution. it will ensure that frivolous
D
claims are filtered out through the process of adjudication
in the Tribunal. The High Court will also have the benefit
of a reasoned decision on merits which will be of use to it
in finally deciding the matter.
E 91. It has also been contended before us that even in
dealing with cases which are properly before the Tribunals,
the manner in which justice is dispensed by them leaves
much to be desired. Moreover, the remedy provided in the
parent statutes, by way of an appeal by special leave under
F Article 136 of the Constitution, is too costly and
inaccessible for it to be real and effective. Furthermore,
the result of providing such a remedy is that the docket of
the Supreme Court is crowded with decisions of Tribunals
that are challenged on relatively trivial grounds and it is
G forced to perform the role of a first appellate court. We
have already emphasised the necessitv for ensuring that
the High Courts are able to exercise judicial
superintendence over the decisions of the Tribunals under
Article 227 of the Constitution. In R.K. Jain's case (supra).
after taking note of these facts. it was suggested that the
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 149
[JAGDISH SINGH KHEHAR, J.]
possibility of an appeal from the Tribunal on questions of A
law to a Division Bench of a High Court within whose
territorial jurisdiction the Tribunal falls. be pursued. It
appears that no follow-up action has been taken pursuant
to the suggestion. Such a measure would have improved
matters considerably. Having regard to both the B
aforestated contentions. we hold that all decisions of
Tribunals. whether created pursuant to Article 323-A or
Article 323-B of the Constitution. will be subject to the High
Court's writ jurisdiction under Articles 226/227 of the
Constitution. before a Division Bench of the High Court c
within whose territorial jurisdiction the particular Tribunal
falls.
92. We may add here that under the existing system. direct
appeals have been provided from the decisions of all
Tribunals to the Supreme Court under Article 136 of the D
Constitution. In view of our above-mentioned observations.
this situation will also stand modified. In the view that we
have taken. no appeal from the decision of a Tribunal will
directly lie before the Supreme Court under Article 136 of
the Constitution: but instead, the aggrieved party will be E
entitled to move the High Court under Articles 226/227 of
the Constitution and from the decision of the Division
Bench of the High Court the aggrieved party could move
this Court under Article 136 of the Constitution.
F
93. Before moving on to other aspects, we may summarise
our conclusions on the jurisdictional powers of these
Tribunals. The Tribunals are competent to hear matters
where the vires of statutory provisions are questioned.
However, in discharging this duty, they cannot act as
substitutes for the High Courts and the Supreme Court G
which have, under our constitutional set-up, been
specifically entrusted with such an obligation. Their
function in this respect is only supplementary and all such
decisions of the Tribunals will be subject to scrutiny before
a Division Bench of the respective High Courts. The H
150 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Tribunals will consequently also have the power to test the
vires of subordinate legislations and rules. However. this
power of the Tribunals will be subject to one important
exception. The Tribunals shall not entertain any question
regarding the vires of their parent statutes following the
B settled principle that a Tribunal which is a creature of an
Act cannot declare that very Act to be unconstitutional. In
such cases alone. the High Court concerned may be
approached directly. All other decisions of these Tribunals,
rendered in cases that they are specifically empowered to
c adjudicate upon by virtue of their parent statutes, will also
be subject to scrutiny before a Division Bench of their
respective High Courts. We may add that the Tribunals will.
however. continue to act as the only courts of first instance
in respect of the areas of law for which they have been
constituted. By this. we mean that it will not be open for
D
litigants to directly approach the High Courts even in cases
where they question the vires of statutory legislations
(except. as mentioned. where the legislation whii:h creates
the particular Tribunal is challenged) by overlooking the
jurisdiction of the concerned Tribunal.
E
94. The directions issued by us in respect of making the
decisions of Tribunals amenable to scrutiny before a
Division Bench of the respective High Courts will. however.
come into effect prospectively i.e. will apply to decisions
F rendered hereafter. To maintain the sanctity of judicial
proceedings. we have invoked the doctrine of prospective
overruling so as not to disturb the procedure in relation to
decisions already rendered."
G Based on the decisions of this Court referred to above, it was
the contention of the learned counsel for the respondents, that
the submissions advanced on behalf of the petitioners, are
liable to outright rejection.
{ii) Reliance was placed first of all on Union of India v.
H Delhi High Court Bar Association, (2002) 4 SCC 275. Insofar
MADRAS BAR ASSOCIATION v. UNION OF INDIA 151
[JAGDISH SINGH KHEHAR, J.]
as the controversy raised in the instant judgment is concerned, A
it would be relevant to mention, that banks and financial
institutions had been experiencing considerable difficulties in
recovery of loans, and enforcement of securities. The procedure
for recovery of debts due to banks and financial institutions,
which was being followed, had resulted in the funds being B
blocked. To remedy the above situation, Parliament enacted the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993. The Act, inter a/ia, provided for establishment of tribunals
and Appellate Tribunals. The said tribunals were given
jurisdiction, powers and authority, to entertain and decide, c
applications from banks and financial institutions, for recovery
of debts, due to banks and financial institutions. The Appellate
Tribunal, was vested with the jurisdiction and authority, to
entertain appeals. The procedure to be followed by the
tribunals, as also, the Appellate Tribunals, was provided for D
under the above enactment. The legislation also provided for
modes of recovery of debts through Recovery Officers
(appointed under the Act). The constitutional validity of the
Recovery of Debts Due to Banks and Financial Institutions Act,
1993 was raised on the ground, that the legislation was
unreasonable and violative of Article 14 of the Constitution. It E
was also the claim of those who raised the said challenge, that
the enactment was beyond the legislative competence of the
Parliament. The controversy came to be examined, in the first
instance, by the Delhi High Court (in Delhi High Court Bar
Association v. Union of India, AIR 1975 Delhi 323). The Delhi F
High Court held, that even though the tribunal could be
constituted by the Parliament, and even though the constitution
of the tribunal was within the purview of Articles 323A and 323B
of the Constitution, and despite the fact that, the expression
"administration of justice" appearing in entry 11A of List Ill of G
the Seventh Schedule to the Constitution, would also include
tribunals administering justice, yet the impugned Act was
unconstitutional, as it had the effect of eroding the
independence of the judiciary, besides being irrational,
discriminatory, unreasonable and arbitrary. As such it was held, H
152 SUPREME COURT REPORTS [2014] 10 S.C.R.
A that the provisions of the enactment were violative of the
mandate contained in Article 14 of the Constitution. The High
Court, in its judgment, also quashed the appointment of
Presiding Officers of the tribunal. While adjudicating upon the
above controversy in reference to some of the issues that have
B been raised before us, our pointed attention was invited to the
following observations:
"21 ...... Sub-section (20) of Section 19 provides that after
giving the applicant and the defendant an opportunity of
being heard, the Tribunal may pass such interim or final
c order as it thinks fit to meet the ends of justice. It is after
this order that a certificate is issued by the Presiding
Officer to the Recovery Officer for recovery of money.
Section 22 of the Act has not been amended. Therefore.
reading Sections 19 and 22 of the Act together. it appears
D that the Tribunal and the Appellate Tribunal are to be
guided by the principles of natural justice while trying the
matter before them. Section 22(1) of the Act stipulates that
the Tribunal and the Appellate Tribunal, while being guided
by the principles of natural justice, are to be subjected to
E the other provisions of the Act and the Rules. Rule 12(7)
provides that if a defendant denies his liability to pay the
claim made by the applicant. the Tribunal may act upon the
affidavit of the applicant who is acquainted with the facts
of the case. In this Rule. which deals with the consideration
F of the applicant's bank application. there is no reference
to the examination of witnesses. This sub-rule refers only
to the affidavit of the applicant. Rule 12(6). on the other
hand. provides that the Tribunal may, at any time. for
sufficient reason order a fact to be proved by affidavit or
G may pass an order that the affidavit of any witness may
be read at the hearing. It is in the proviso to this sub-rule
that a reference is made to the cross-examination of
witnesses.
22. At the outset. we find that Rule 12 is not happily
H worded. The reason for establishing Banking Tribunals
'
MADRAS BAR ASSOCIATION v. UNION OF INDIA 153
[JAGDISH SINGH KHEHAR, J.]
being to expedite the disposal of the claims by the banks. A
Parliament thought it proper only to require the principles
of natural justice to be the guiding factor for the Tribunals
in deciding the applications. as is evident from Section 22
of the Act. While the Tribunal has, no doubt, been given
the power of summoning and enforcing the attendance of B
any witness and examining him on oath, but the Act does
not contain any provision which makes it mandatory for the
witness to be examined, if such a witness could be
produced. Rule 12(6) has to be read harmoniously with the
other provisions of the Act and the Rules. As we have c
already noticed. Rule 12(7) gives the Tribunal the power
to act upon the affidavit of the applicant where the
defendant denies his liability to pay the claims. Rule 12(6),
if paraphrased, would read as follows:
1. the Tribunal may, at any time for sufficient D
reason, order that any particular fact or facts may
be proved by affidavit ... on such conditions as the
Tribunal thinks reasonable;
2. the Tribunal may, at any time for sufficient E
reason, order ... that the affidavit of any witness
may be read at the hearing, on such conditions as
the Tribunal thinks reasonable.
23. In other words, the Tribunal has the power to require
any particular fact to be proved by affidavit, or it may order F
that the affidavit of any witness may be read at the hearing.
While passing such an order, it must record sufficient
reasons for the same. The proviso to Rule 12(6) would
certainly apply only where the Tribunal chooses to issue a
direction on its own. for any particular fact to be proved G
by affidavit or the affidavit of a witness being read at the
hearing. The said proviso refers to the desire of an
applicant or a defendant for the production of a witness
for cross-examination. In the setting in which the said
proviso occurs. it would appear to us that once the parties H
154 SUPREME COURT REPORTS [2014] 10 S.C.R.
A have filed affidavits in support of their respective cases. it
is only thereafter that the desire for a witness to be cross-
examined can legitimately arise. It is at that time. if it
appears to the Tribunal. that such a witness can be
produced and it is necessary to do so and there is no
B desire to prolong the case that it shall require the witness
to be present for cross-examination and in the event of his
not appearing. then the affidavit shall not be taken into
evidence. When the High Courts and the Supreme Court
in exercise of their jurisdiction under Article 226 and Article
c 32 can decide questions of fact as well as law merely on
the basis of documents and affidavits filed before them
ordinarily. there should be no reason as to why a Tribunal.
likewise. should not be able to decide the case merely on
the basis of documents and affidavits before it. It is
common knowledge that hardly any transaction with the
D
bank would be oral and without proper documentation.
whether in the form of letters or formal agreements. In such
an event the bona fide need for the oral examination of a
witness should rarely arise. There has to be a very good
reason to hold that affidavits, in such a case, would not be
E sufficient.
24. The manner in which a dispute is to be adjudicated
upon is decided by the procedural laws which are enacted
from time to time. It is because of the enactment of the
F Code of Civil Procedure that normally all disputes between
the parties of a civil nature would be adjudicated upon by
the civil courts. There is no absolute right in anyone to
demand that his dispute is to be adjudicated upon only by
a civil court. The decision of the Delhi High Court proceeds
G on the assumption that there is such a right. As we have
already observed. it is by reason of the provisions of the
Code of Civil Procedure that the civil courts had the right.
prior to the enactment of the Debts Recovery Act. to
decide the suits for recovery filed by the banks and
H financial institutions. This forum. namely. that of a civil court.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 155
[JAGDISH SINGH KHEHAR, J.]
now stands replaced by a Banking Tribunal in respect of A
the debts due to the bank. When in the Constitution Articles
323-A and 323-B contemplate establishment of a Tribunal
and that does not erode the independence of the judiciarv.
there is no reason to presume that the Banking Tribunals
and the Appellate Tribunals so constituted would not be B
independent. or that justice would be denied to the
defendants or that the independence of the judiciary would
stand eroded.
25. Such Tribunals. whether they pertain to income tax or
sales tax or excise or customs or administration. have now C
become an essential part of the judicial system in this
country. Such specialised institutions may not strictly come
within the concept of the judiciary, as envisaged by Article
50. but it cannot be presumed that such Tribunals are not
an effective part of the justice delivery system. like courts D
of law. It will be seen that for a person to be appointed as
a Presiding Officer of a Tribunal, he should be one who is
qualified to be a District Judge and, in case of
appointment of the Presiding Officer of the Appellate
Tribunal he is, or has been, qualified to be a Judge of a E
High Court or has been a member of the Indian Legal
Service who has held a post in Grade I for at least three
years or has held office as the Presiding Officer of a
Tribunal for at least three years. Persons who are so
appointed as Presiding Officers of the Tribunal or of the F
Appellate Tribunal would be well versed in law to be able
to decide cases independently and judiciously. It has to be
borne in mind that the decision of the Appellate Tribunal
is not final. in the sense that the same can be subjected
to judicial review by the High Court under Articles 226 and G
227 of the Constitution.
26. With the establishment of the Tribunals. Section 31
provides for the transfer of pending cases from civil courts
to the Tribunal. We do not find such a provision being in
any way bad in law. Once a Debts Recovery Tribunal has H
156 SUPREME COURT REPORTS [2014] 10 S.C.R.
A been established, and the jurisdiction of courts barred by
Section 18 of the Act, it would be only logical that any
matter pending in the civil court should stand transferred
to the Tribunal. This is what happened when the Central
Administrative Tribunal was established. All cases pending
B in the High Courts stood transferred. Now that exclusive
jurisdiction is vested in the Banking Tribunal. it is only in
that forum that bank cases can be tried and. therefore. a
provision like Section 31 was enacted.
27. With regard to the observations of the Delhi High Court
c in relation to the pecuniary jurisdiction of the Tribunals and
of the Delhi High Court. the Act has been enacted for the
whole of India. In most of the States. thP- High Courts do
not have original jurisdiction. In order to see that the
Tribunal is not flooded with cases where the amounts
D involved are not very large, the Act provides that it is only
where the recovery of the money is more than Rs 10 lakhs
that the Tribunal will have the jurisdiction to entertain the
application under Section 19. With respect to suits for
recovery of money less than Rs 10 lakhs. it is the
E subordinate courts which would continue to try them. In
other words, for a claim of Rs 10 lakhs or more, exclusive
jurisdiction has been conferred on the Tribunal but for any
amount less than Rs 10 lakhs, it is the ordinary civil courts
which will have jurisdiction. The bifurcation of original
F jurisdiction between the Delhi High Court and the
subordinate courts is a matter which cannot have any
bearing on the validity of the establishment of the Tribunal.
It is only in those High Courts which have original
jurisdiction that an anomalous situation arises where suits
for recovery of money less than Rs 10 lakhs have to be
G
decided by the High Courts while the Tribunals have
jurisdiction to decide suits for recovery of more than Rs
10 lakhs. This incongruous situation. which can be
remedied by the High Court divesting itself of the original
jurisdiction in regard to such claims and vesting the said
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 157
[JAGDISH SINGH KHEHAR, J.]
jurisdiction with the subordinate courts or vice versa. A
cannot be a ground for holding that the Act is invalid.
)()()( xxx )()()(
30. By virtue of Section 29 of the Act, the provisions of the
Second and Third Schedules to the Income Tax Act, 1961 B
and the Income Tax (Certificate Proceedings) Rules, 1962,
have become applicable for the realisation of the dues by
the Recovery Officer. Detailed procedure for recovery is
contained in these Schedules to the Income Tax Act.
including provisions relating to arrest and detention of the C
defaulter. It cannot. therefore. be said that the Recovery
Officer would act in an arbitrary manner. Furthermore,
Section 30. after amendment by the Amendment Act.
2000. gives a right to any person aggrieved by an order
of the Recovery Officer, to prefer an appeal to the Tribunal. D
Thus now an appellate forum has been provided against
any orders of the Recovery Officer which may not be in
accordance with law. There is, therefore. sufficient
safeguard which has been provided in the event of the
Recovery Officer acting in an arbitrary or an unreasonable E
manner. The provisions of Sections 25 and 28 are.
therefore. not bad in law.
31. For the aforesaid reasons. while allowing the appeals
of the Union of India and the Banks. we hold that the
F
Recovery of Debts Due to Banks and Financial Institutions
Act. 1993 is a valid piece of legislation. As a result thereof.
the writ petitions or appeals filed by various parties
challenging the validity of the said Act or some of the
provisions thereof. are dismissed. It would be open to the
parties to raise other contentions on the merits of their G
cases before the authority constituted under the Act and.
only thereafter. should a High Court entertain a petition
under Articles 226 and/or 227 of the Constitution.
Transferred cases stand disposed of accordingly. Parties
to bear their own costs." H
158 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (iii) Reliance was next placed on State of Karnataka v.
Vishwabharathi House Building Cooperative Society & Ors.,
(2003) 2 sec 412. The primary question which arose for
consideration was the constitutional validity of the Consumer
Protection Act, 1986. The challenge was raised on the ground,
B that Parliament was not empowered to establish a hierarchy
of courts like the District Fora, the State Commission and the
National Commission, as this would constitute a parallel
hierarchy of courts, in addition to the courts established under
the Constitution, namely, District Courts, High Courts and the
c Supreme Court. In this behalf the pointed submission was, that
Parliament could only establish courts, with power to deal with
specific subjects, but not such a court which would run parallel
Jo the civil courts. it was sought to be asserted, that even under
Articles 323A and 3238 of the Constitution, Parliament could
D not enact a legislation, by which it could establish tribunals, in
substitution of civil courts including the High Court. This,
according to those who raised the challenge, would strike at
the independence of the judiciary. As against the above
assertions, the legislative competence of the Parliament and
the State Legislatures, to provide for creation of courts and
E tribunals, reliance was placed on entries 77, 78 and 79 in List
I of the Seventh Schedule, as also, entries 11A and 46
contained in List 111 of the Seventh Schedule to the Constitution.
While examining the challenge raised to the Consumer
Protection Act, 1986, on the grounds referred to above, this
F Court held as under:-
"12. A bare perusal of the aforementioned provisions does
not leave any manner of doubt as regard the legislative
competence of Parliament to provide for creation of
G Special Ccurts and Tribunals. Administration of justice;
constitution and organization of all courts, except the
Supreme Court and the High Courts is squarely covered
by Entry 11-A of List Ill of the Constitution of India. The said
entry was originally a part of Entry 3 of List II. By reason of
the Constitution.(Forty-second Amendment) Act, 1976 and
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 159
[JAGDISH SINGH KHEHAR, J.]
by Section 57(a)(vi) thereof, it was inserted into List Ill as A
Item 11-A.
13. By virtue of clause (2) of Article 246 of the Constitution.
Parliament has the requisite power to make laws with
respect of constitution of organization of all courts except
the Supreme Court and the High Court. B
14. The learned counsel appearing on behalf of the
petitioners could not seriously dispute the plenary power
of Parliament to make a law as regard constitution of
courts but as noticed supra. merely urged that it did not C
have the competence to create parallel civil courts.
15. The said submission has been made purported to be
relying on or on the basis of the following observations
made by Shinghal, J. wh.ile delivering a partially dissenting
judgment in Special Courts Bill, 1978, In re: (1979) 1 SCC D
380 (SCC at p. 455, para 152)
"152. The Constitution has thus made ample and
effective provision for the establishment of a strong.
independent and impartial judicial administration in
the country. with the necessary complement of civil E
and criminal courts. It is not permissible for
Parliament or a State Legislature to ignore or
bypass that scheme of the Constitution by providing
for the establishment of a civil or criminal court
parallel to a High Court in a State. or by way of an F
additional or extra or a second High Court. or a
court other than a court subordinate to the High
Court. Any such attempt would be unconstitutional
and will strike at the independence of the judiciary
which has so nobly been enshrined in the G
Constitution and so carefully nursed over the years."
16. The argument of the learned counsel is fallacious
inasmuch as the provisions of the said Act are in addition
to the provisions of any other law for the time being in force
H
160 SUPREME COURT REPORTS [2014] 10 S.C.R.
A and not in derogation thereof as is evident from Section 3
thereof.
'17. The provisions of the said Act clearly demonstrate that
it was enacted keeping in view the long-felt necessity of
protecting the common man from wrongs wherefor the
B ordinarv law for all intent and purport had become illusorv.
In terms of the said Act .. a consumer is entitled to
participate in the proceedings directly as a result whereof
his helplessness against a powerful business house may
be taken care of.
c 18. This Court in a large number of decisions considered
the purport and object of the said Act. By reason of the
said statute, quasi-judicial authorities have been created
at the district, State and Central levels so as to enable a
consumer to ventilate his grievances before a forum where
D justice can be done without any procedural wrangles and
hypertechnicalities.
19. One of the objects of the said Act is to provide
momentum to the consumer movement. The Central
E Consumer Protection Council is also to be constituted in
terms of Section 4 of the Act to promote and protect the
rights of the consumers as noticed hereinbefore.
xxx xxx xxx
24. In terms of Section 10, the President of a District
F
Forum shall be a person who is, or has been, or is qualified
to be a District Judge and the Forum shall also consist of
two other members who are required to be persons of
ability, integrity and standing and have adequate
knowledge or experience of, or have shown capacity in
G dealing with, problems relating to economics, law,
commerce, accountancy, industry, public affairs or
administration and one of them shall be a woman. The
tenure of the members of the District Forum is fixed.
H 25. Section 13 of the said Act lays down a detailed
MADRAS BAR ASSOCIATION v. UNION OF INDIA 161
[JAGDISH SINGH KHEHAR, J.]
procedure as regards the mode and manner in which the A
complaints received by the District Forum are required to
be dealt with. Section 14 provides for the directions which
can be issued by the District Forum on arriving at a
satisfaction that the goods complained against suffer from
any of the defects specified in the complaint or that any of B
the allegations contained in the complaint about the
deficiencies in services have been proved.
26. Section 15 provides for an appeal from the order made
by the District Forum to the State Commission.
c
27. Section 16 provides for composition of the State
Commission which reads thus:
"16. (1) Each State Commission shall consist of,-
(a) a person who is or has been a Judge of a High D
Court, appointed by the State Government, who
shall be its President:
Provided that no appointment under this clause shall
be made except after consultation with the Chief
Justice of the High Court; E
{b) two other members, who shall be persons of
ability, integrity and standing and have adequate
knowledge or experience of, or have shown
capacity in dealing with, problems relating to F
economics, law, commerce, accountancy, industry,
public affairs or administration, one of whom shall
be a woman:
Provided that every appointment under this clause
shall be made by the State Government on the G
recommendation of a Selection Committee
consisting of the following, namely:
(1) President of the State Commission:
Chairman H
162 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (i1) Secretary of the Law Department of the
State: Member
(iii) Secretary in charge of the Department
dealing with consumer affairs in the State:
Member
B
(2) The salary or honorarium and other allowances
payable to, and the other terms and conditions of
service of the members of the State Commission
shall be such as may be prescribed by the State
c Government.
(3) Every member of the State Commission shall
hold office for a term of five years or up to the age
of sixty-seven years, whichever is earlier and shall
D not be eligible for reappointment.
(4) Notwithstanding anything contained. in sub-
section (3), a person appointed as a President or
as a member before the commencement of the
Consumer Protection (Amendment) Act, 1993, shall
E continue to hold such office as President or
member, as the case may be, till the completion of
his term."
The members of the State Commission are to be selected
F by a Selection Committee, the Chairman whereof would
be the President of the State Commission.
28. Section 19 provides for an appeal from a decision of
the State Commission to the National Commission.
Section 20 deals with the composition of the National
G Commission, the President whereof would be a person
who is or has been a Judge of the Supreme Court and such
appointment shall be made only upon consultation with the
Chief Justice of India. So far as the members of the
National Commission are concerned, the same are also
H to be made on the recommendation of the Selection
MADRAS BAR ASSOCIATION v. UNION OF INDIA 163
[JAGDISH SINGH KHEHAR, J.]
Committee, the Chairman whereof would be a person who A
is a Judge of the Supreme Court to be nominated by the
Chief Justice of India. The tenure of the office of the
National Commission is also fixed by reason of sub-
section (3) of Section 20.
B
29. By reason of the provisions of the said Act. therefore,
independent authorities have been created.
30. Sections 15, 19 and 23 provide for the hierarchy of
appeals. By reason of sub-sections (4), (5) and (6) of
Section 13, the District Forum shall have the same powers C
as are vested in the civil courts for the purposes mentioned
therein. Sub-sections (2) and (2-A) of Section 14 mandate
that the proceedings shall be conducted by the President
of the District Forum and at least one member thereof
sitting together. Only in the event of any difference between D
them on any point or points, the same is to be referred to
the other member for hearing thereon and the opinion of
the majority shall be the order of the District Forum. By
reason of Section 18, the provisions of Sections 12, 13
and 14 and the rules made thereunder would mutatis E
mutandis be applicable to the disposal of disputes by the
State Commission.
31. Section 23 provides for a limited appeal to the
Supreme Court from an order made by the National
Commission i.e. when the same is made in exercise of F
its original power as conferred by sub-clause (1) of clause
(a) of Section 21."
This Court then, having placed reliance on Union of India
v. Delhi High Court Bar Association (supra), Navinchandra G
Mafatlal, Bombay v. The Commissioner of Income Tax,
Bombay City, AIR 1955 SC 58, and Union of India v.
l-1arbhajan Singh Dhillon, (1971) 2 sec 779, concluded as
under:-
"37. Once it is held that Parliament had the legislative H
164 SUPREME COURT REPORTS (2014] 10 S.C.R.
A competence to enact the said Act. the submissions of the
learned counsel that the relevant provisions of the
Constitution required amendments must be neglected.
38. The scope and object of the said legislation came up
for consideration before this Court in Common Cause, A
B
Registered Society v. Union of India, (1997) 10 SCC 729.
It was held: (SCC p. 730, para 2)
"2. The object of the legislation, as the preamble of
the Act proclaims, is 'for better protection of the
c interests of consumers'. During the last few years
preceding the enactment there was in this country
a marked awareness among the consumers of
goods that they were not getting their money's worth
and were being exploited by both traders and
D manufacturers of consumer goods. The need for
consumer redressal fora was, therefore, increasingly
felt. Understandably, therefore, legislation was
introduced and enacted with considerable
enthusiasm and fanfare as a path-breaking
E benevolent legislation intended to protec;t the
consumer from exploitation by unscrupulous
manufacturers and traders of consumer goods. A
three-tier fora comprising the District Forum, the
State Commission and the National Commission
F came to be envisaged under the Act for redressal
of grievances of consumers."
39. The rights of the parties have adequately been
safeguarded by reason of the provisions of the said Act
inasmuch as although it provides for an alternative system
G of consumer jurisdiction on summary trial. they are
required to arrive at a conclusion based on reasons. Even
when quantifying damages, they are required to make an
attempt to serve the ends of justice aiming not only at
recompensing the individual but also to bring about a
H qualitative change in the attitude of the service provider.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 165
[JAGDISH SINGH KHEHAR, J.]
Assignment of reasons excludes or at any rate minimizes A
the chances of arbitrariness and the higher forums created
under the Act can test the correctness thereof.
40. The District Forum. the State Commission and the
National Commission are not manned by lay persons. The B
President would be a person having judicial background
and other members are required to have the expertise in
the subjects such as economics. law. commerce.
accountancy. industrv. public affairs. administration etc. It
may be true that by reason of sub-section (2-A) of Section
14 of the Act. in a case of difference of opinion between
c
two members. the matter has to be referred to a third
member and. in rare cases. the majority opinion of the
members may prevail over the President. But. such
eventuality alone is insufficient for striking down the Act as
unconstitutional. particularly, when provisions have been D
made therein for appeal thereagainst to a higher forum.
41. By reason of the provisions of the said Act. the power
of judicial review of the High Court. which is a basic feature
of the Constitution. has not been nor could be taken away. E
xxx xxx xxx
49. The question as regards the applicability or otherwise
of Articles 323-A and 323-B of the Constitution in the
matter of constitution of such Tribunals came up for F
consideration before this Court in L. Chandra Kumar v.
Union of India. (1997) 3 SCC 261. This Court therein
clearly held that the constitutional provisions vest
Parliament and the State Legislatures, as the case may
be, with powers to divest the traditional courts of a G
considerable portion of their judicial work. It was observed
that the Parliament and the State Legislatures possess
legislative competence to effect changes in the original
jurisdiction of the Supreme Court and High Court apart
from the authorisation that flows from Articles 323-A and H
166 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 323-B in terms of Entries 77. 78, 79 and 95 of List I so far
as the Parliament is concerned, and in terms of Entry 65
of List II and Entry 46 of List 111 so far as the State
Legislatures are concerned. It was further held that power
of judicial review being the basic structure of the
B Constitution cannot be taken away.
50. We. therefore. are clearly of the opinion that the said
Act cannot be said to be unconstitutional."
The fourth contention:
c 52(i) In response to the fourth contention, namely, the
challenge raised by the learned counsel for the petitioners, to
the various provisions of the NTT Act, it was the submission of
the learned counsel for the respondents, that in view of the
submissions advanced in respect of the third contention, it is
0
apparent that the Parliament had the legislative competence
to enact the NTT Act. It was submitted, that the NTT Act was
enacted keeping in mind the parameters laid down by this
Court, by preserving the power of judicial review vested in the
High Courts under Articles 226 and 227 of the Constitution, as
E also, by preserving the power of judicial review vested in this
Court under Articles 32 and 136 of the Constitution. It is,
therefore, submitted that the final word in respect of the instant
adjudicatory process, stands preserved with courts of law. And
therefore, the submissions advanced at the hands of the learned
F counsel for the petitioners on the individual provisions of the
NTT Act, pertaining to the independence of the adjudicatory
process, were being exaggerated out of proportion.
(ii) Despite having made the above submissions, the
G Attorney General for India, was fair and candid in stating, that
if this Court felt that there was need to make certain changes
in the provisions referred to by the petitioners, he had the
instructions to state, that any suggestion made by this Court will
be viewed positively, and necessary amendments in the NTT
H Act would be carried out.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 167
[JAGDISH SINGH KHEHAR, J.]
The debate, and the consideration: A
I. Constitutional validity of the NTT Act - Does the NTT Act
violate the "basic structure" of the Constitution?
53. The principal contention advanced at the hands of the
learned counsel for the petitioners was premised on the B
submission, that Article 323B, inserted by the Constitution
(Forty-second Amendment) Act 1976, to the extent that it
violated the principles of, "separation of powers", "rule of law",
and "judicial review", was liable to be struck down. This striking
down was founded on an alleged violation of the "basic c
structure" doctrine. Similarly, various provisions of the NTI Act,
were sought to be assailed. The provisions of the NTI Act were
challenged, on the premise, that they had trappings of executive
control, over the adjudicatory process vested with the NTI, and
therefore, were liable to be set aside as unconstitutional. D
54. In the context of the foregoing submissions advanced
at the hands of the learned counsel for the petitioners, it is
essential for us to examine the exact contours of "judicial
review", in the framework and scheme, of the concepts of "rule
of law" and "separation of powers", which have been held to E
constitute the "basic structure" of the Constitution. And also, the
. essential ingredients, of an independent adjudicatory process.
It is, therefore, that we would travel the ladder of history and law,
to determine the exact scope of the "judicial review", which
constitutes the "basic structure" of the Constitution. This would F
lead us to unravel the salient ingredients of an independent
adjudicatory process. Based thereon, we will record our
conclusions. The analysis:
55. Reference must first of all be made to the decision
rendered by this Court in Kesavananda Bharati v. State of G
Kerala, (1973) 4 SCC 225. In the above cited case, this Court
was engaged with the validity of the Constitution (Twenty-fourth
Amendment) Act, 1971, as also, the Constitution (Twenty-fifth
Amendment) Act, 1971. The former Act related to the
amendments of Articles 13 and 368 of the Constitution, H
168 SUPREME COURT REPORTS [2014] 10 S.C.R.
A whereas the latter, pertained to the amendment of Article 31
of the Constitution. The instant judgment was rendered by a
constitution bench of 13 Judges. Seven of the Judges
expressed the majority view. The observations recorded by this
Court recognising "judicial review" as a component of the "basic
B structure" or the Constitution, were made by four Judges.
Reference is first of all being made, to the view expressed by
S.M. Sikri, CJ.:
"292. The learned Attorney-General said that every
provision of the Constitution is essential; otherwise it would
c not have been put in the Constitution. This is true. But this
does not place every provision of the Constitution in the
same position. The true position is that every provision of
the Constitution can be amended provided in the result the
basic foundation and structure of the constitution remains
D the same. The basic structure may be said to consist of
the following features:
(1) Supremacy of the Constitution;
(2) Republican and Democratic form of
E
Government;
(3) Secular character of the Constitution;
(4) Separation of powers between the legislature.
F the executive and the judiciary;
(5) Federal character of the Constitution.
293. The above structure is built on the basic foundation
i.e. the dignity and freedom of the individual. This is of
G supreme importance. This cannot by any form of
amendment be destroyed."
It is also imperative to refer to the view expressed by J.M.
Shelat and A.N. Grover, JJ., who delivered a common
H judgment:
MADRAS BAR ASSOCIATION v. UNION OF !NOIA 169
[JAGDISH SINGH KHEHAR, J.]
"487 ...... The Rule of Law has been ensured by providing A
for judicial review.".
)()()( )()()( )()()(
577 ...... Judicial review is undertaken by the courts "not
out of any desire to tilt at legislative authority in a crusader's B
spirit, but in discharge of a duty plainly laid down upon
them by the Constitution''. The respondents have also
contended that to let the court have judicial review over
constitutional amendments would mean involving the court
in political questions. To this the answer may be given in C
the words of Lord Porter in Commonwealth of Australia v.
Bank of New South Wales, 1950 AC 235 at 310,:
'The problem to be solved will often be not so much
legal as political, social or economic, yet it must be o
solved by a Court of law. For where the dispute is,
as here, not only between Commonwealth and
citizen but between Commonwealth and interven.ing
States on the one hand and citizens and States on
the other, it is only the Court that can decide the
E
issue, it is vain to invoke the voice of Parliament."
There is ample evidence in the Constitution itself to indicate
that it creates a system of checks and balances by reason
of which powers are so distributed that none of the three
organs it sets up can become so pre-dominant as to F
disable the others from exercising and discharging powers
and functions entrusted to them. Though the Constitution
does not lay down the principle of separation of powers
in all its rigidity as is the case in the United States
Constitution but it envisages such a separation to a G
degree as was found in Ranasinghe's case, 1965 AC 172.
The judicial review provided expressly in our Constitution
by means of Articles 226 and 32 is one of the features
upon which hinges the system of checks and balances.
Apart from that, as already stated, the necessity for judicial H
170 SUPREME COURT REPORTS [2014] 10 S.C.R.
A decision on the competence or otherwise of an Act arises
from the very federal nature of a Constitution (per Haldane,
L.C. in Attorney-General for the Commonwealth of
Australia v. Colonial Sugar Refining Co., 1914 AC 237
and Ex parte Walsh & Johnson; In re Yates, (1925) 37
B CLR 36 at page 58. The function of interpretation of a
Constitution being thus assigned to the judicial power of
the State. the question whether the subject of a law is within
the ambit of one or more powers of the Legislature
conferred by the Constitution would always be a question
c of interpretation of the Constitution. It may be added that
at no stage the respondents have contested the
proposition that the validity of a constitutional amendment
can be the subject of review by this Court. The Advocate-
General of Maharashtra has characterized judicial review
as undemocratic. That cannot, however, be so in our
D
Constitution because of the provisions relating to the
appointment of Judges, the specific restriction to which the
fundamental rights are made subject, the deliberate.
exclusion of the due process clause in Article 21 and the
affirmation in Article 141 that Judges declare but not make
E
law. To this may be added the none too rigid amendatory
process which authorizes amendment by means of 2/3
majority and the additional requirement of ratification. ·
xxx xxx xxx
F
582. The basic structure of the Constitution is not a vague
concept and the apprehensions expressed on behalf of
the respondents that neither the citizen nor the Parliament
would be able to .understand it are unfounded. If the
historical background. the preamble. the entire scheme of
G the Constitution. relevant provisions thereof including
Article 368 are kept in mind there can be ·no difficulty in
discerning that the following can be regarded as the basic
elements of the constitutional structure. (These cannot be
catalogued but can only be illustrated):
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 171
[JAGDISH SINGH KHEHAR, J.]
(1) The supremacy of the Constitution. A
(2) Republican and Democratic form of government
and sovereignty of the country'.
(3) Secular and federal character of the Constitution.
B
(4) Demarcation of power between the Legislature.
the executive and the judiciary.
(5) The dignity of the individual secured by the
various freedoms and basic rights in Part Ill and the C
mandate to build a welfare State contained in Part
IV.
(6) The unity and the integrity of the Nation."
In this behalf it is also imperative for us to record the D
observations of P. Jaganmohan Reddy, J., who observed as
under:-
"1104 ...... There is no constitutional matter which is not in
some way or the other involved with political, social or
economic questions, and if the Constitution-makers have E
vested in this Court a power of Judicial review, and while
so vesting, have given it a prominent place describing it
as the heart and soul of the Constitution, we will not be
deterred from discharging that duty, merely because the
validity or otherwise of the legislation will affect the political F
or social policy underlying it. The basic approach of this
Court has been. and must always be. that the Legislature
has the exclusive power to determine the policy and to
translate it into law, the constitutionality of which is to be
presumed, unless there are strong and cogent reasons for G
holding that it conflicts with the constitutional mandate. In
this regard both the Legislature. the executive, as well as
the judiciary are bound by the paramount instrument, and,
therefore. no court and no Judge will exercise the judicial
power dehors that instrument. nor will it function as a H
, 172 SUPREME COURT REPORTS [2014] 10 S.C.R.
A supreme legislature above the Constitution. The bona
fides of all the three of them has been the basic
assumption. and though all of them may be liable to error.
it can be corrected in the manner and by the method
prescribed under the Constitution and subject to such
B limitations as may be inherent in the instrument."
Some of the observations of H.R. Khanna, J., are also
relevant to the issue in hand. The same are placed hereunder:
"1529 ...... The power of judicial review is, however,
c confined not merely to deciding whether in making the
impugned laws the Central or State Legislatures have
acted within the four corners of the legislative lists
earmarked for them; the courts also deal with the question
as to whether the laws are made in conformity with and
D not in violation of the other provisions of the Constitution.
Our Constitution-makers have provided for fundamental
rights in Part Ill and made them justiciable. As long as
some fundamental rights exist and are a part of the
Constitution. the power of judicial review has also to be
E exercised with a view to see that the guarantees afforded
by those rights are not contravened. Dealing with draft
Article 25 (corresponding to present Article 32 of the
Constitution) by which a right is given to move the
Supreme Court for enforcement of the fundamental rights.
F Dr Ambedkar speaking in the Constituent Assembly on
December 9. 1948 observed:
"If I was asked to name any particular article in this
Constitution as the most important an article without
which this Constitution would be a nullity - I could
G not refer to any other article except this one It is the
very soul of the Constitution and the very heart of it
and I am glad that the House has realised its
importance" (Constituent Assembly Debates, Vol
VII, p. 953).
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 173
[JAGDISH SINGH KHEHAR, J.]
Judicial review has thus become an integral part of our A
constitutional system and a power has been vested in the
High Courts and the Supreme Court to decide about the
constitutional validity of provisions of statutes.
Our Constitution postulates rule of law in the sense of B
supremacy of the Constitution and the laws as opposed
to arbitrariness. The vesting of power of exclusion of
judicial review in a legislature, including State Legislature,
contemplated by Article 31-C, in my opinion, strikes at the
basic structure of the Constitution. The second part of
Article 31-C thus goes beyond the permissible limit of C
what constitutes amendment under Article 368.
xxx xxx xxx
1533. The position as it emerges is that it is open to the D
authority amending the Constitution to exclude judicial
review regarding the validity of an existing statute. It is
likewise open to the said authority to exclude judicial review
regarding the validity of a statute which might be enacted
by the legislature in future in respect of a specified subject.
E
In such an event, judicial review is not excluded for finding
whether the statute has been enacted in respect of the
specified subject. Both the above types of constitutional
amendments are permissible under Article 368. What is
not permissible. however. is a third type of constitutional
amendment. according to which the amending authority not F
merely excludes judicial review regarding the validity of a
statute which might be enacted by the legislature in future
in respect of a specified subject but also excludes judicial
review for finding whether the statute enacted by the
legislature is in respect of the subject for which judicial G
review has been excluded.
xxx xxx
1537. I may now sum up my conclusions relating to power
of amendment under Article 368 of tbe Constitution as it H
174 SUPREME COURT REPORTS [2014] 10 S.C.R.
A existed before the amendment made by the Constitution
(Twenty-fourth Amendment) Act as well as about the
validity of the Constitution (Twenty-fourth Amendment) Act,
the Constitution (Twenty-fifth Amendment) Act and the
Constitution (Twenty-ninth Amendment) Act:
B
(i) Article 368 contains not only the procedure for
the amendment of the Constitution but also confers
the power of amending the Constitution.
(ii) Entry 97 in List I of the Seventh Schedule of the
c Constitution does not cover the subject of
amendment of the Constitution.
(iii) The word "law" in Article 13(2) does not include
amendment of the Constitution. It has reference to
ordinary piece of legislation. It would also in view
D
of the definition contained in clause (a) of Article
13(3) include an ordinance, order, bye-law, rule,
regulation, notification, custom or usage having in
the territory of India the force of law.
E xxx xxx xxx
(vii) The power of amendment under Article 368
does not include the power to abrogate the
Constitution nor does it include the power to alter
F the basic structure or framework of the Constitution.
Subject to the retention of the basic structure or
framework of the Constitution. the power of
amendment is plenary and includes within itself the
power to amend the various articles of the
Constitution. including those relating to fundamental
G
rights as well as those which may be said to relate
to essential features. No part of a fundamental right
can claim immunity from amendatorv process by
being described as the essence, or core of that
right. The power of amendment would also include
H within itself the power to add, alter or repeal the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 175
[JAGDISH SINGH KHEHAR, J.]
various articles. A
)()()( )()()( )()()(
(xiv) The second part of Article 31-C contains the
seed of national disintegration and is invalid on the
following two grounds: B
(1) It gives a carte blanche to the legislature to
make any law violative of Articles 14, 19 and 31 and
make it immune from attack by inserting the
requisite declaration. Article 31-C taken along with C
its second part gives in effect the power to the
legislature including a State Legislature, to amend
the Constitution in important respects.
(2) The legislature has been made the final authority 'O
to decide as to whether the law made by it is for
the objects mentioned in Article 31-C. The vice of
second part of Article 31-C lies in the fact that even
if the law enacted is not for the object mentioned
in Article 31-C. the declaration made by the
legislature precludes a party from showing that the E
law is not for that object and prevents a court from
going into the question as to whether the law
enacted is really for that object. The exclusion by
the legislature. including a State Legislature. of even
that limited judicial review strikes at the basic F
structure of the Constitution. The second part of
Article 31-C goes beyond the permissible limit of
what constitutes amendment under Article 368.
The second part of Article 31-C can be severed G
from the remaining part of Article 31-C and its
invalidity would not affect the validity of the
remaining part. I would. therefore. strike down the
following words in Arti~le 31-C -
"and no law containing a declaration that it is for H
176 SUPREME COURT REPORTS [2014] 10 S.C.R.
A giving effect to such policy shall be called in
question in any court on the ground that it does not
give effect to such policy"."
56(i) The next judgment having a bearing on the subject
is Smt. Indira Nehru Gandhi v. Shri Raj Narain, 1975 Supp.
8
SCC 1. In the instant judgment, this Court examined the
constitutional validity of the Constitution (Thirty-ninth
Amendment) Act, 1975. The issue under reference included the
insertion of Article 329A (and more particularly, the second
clause thereof), which had the effect of taking out from the
C purview of "judicial review", the validity of the election of a
person who was holding, either the office of the Prime Minister
or of the Speaker, or had come to be appointed/chosen as the
Prime Minister or the Speaker, after such election. Insofar as
the instant aspect of the matter is concerned, it would be
D relevant to mention, that the election of the appellant from the
Rae Bareli constituency in the General Parliamentary Elections
of 1971, was set aside by the High Court of Judicature at
Allahabad (hereinafter referred to as, the High Court), on
12. 6.1975. The appellant had assailed the order passed by the
E High Court before this Court. During the pendency of the above
appeal, on 10.8.1975, the Constitution (Thirty-ninth
Amendment) Act was passed, which introduced two new
Articles, namely, Articles 71 and 329A of the Constitution. The
controversy arising out of the above referred appeal, therefore,
F virtually came to be rendered infructuous. It was, by way of a
cross-appeal, that the constitutional validity of the amended
provisions was assailed.
(ii) In the above cross-appeal, it was asserted at the hands
G of the respondent, that "judicial review" was an essential feature
of the "basic structure" of the Constitution. This assertion was
under the doctrine of "separation of powers". The pointed
submission at the hands of the learned counsel for the
respondent was, that "judicial review", in matters of election was
imperative. The issue canvassed was, that "judicial review"
H would ensure free, fair and pure elections. It was sought to be
MADRAS BAR ASSOCIATION v. UNION OF INDIA 177
[JAGDISH SINGH KHEHAR, J.]
asserted, that the power of "judicial review" in the context A
referred to hereinabove, was available both under the American
Constitution, as also, the Australian Constitution. And therefore,
even though there was no express/clear provision on the subject
under the Indian Constitution, since the executive, the legislature
and the judiciary were earmarked respective spheres of activity B
(by compartmentalising them into separate parts and
chapters), the charge and onus of "judicial review'' fell within the
sphere of activity of the judiciary. It was sought to be asserted,
that under Article 136 of the Constitution, all tribunals and courts
are amenable to the jurisdiction of this Court. The corollary c
sought to be drawn was, that if under clause 4 of Article 329A
of the Constitution, the power of "judicial review" was taken
away, it would amount to a destruction of the "basic structure"
of the Constitution. The relevant observations made in the
a
instant judgment rendered by constitution bench of 5 Judges D
of this Court are being extracted hereunder. First and foremost
reference may be made to the following observations of A.N.
Ray, CJ:-
"16. It should be stated here that the hearing has
proceeded on the assumption that it is not necessary to E
challenge the majority view in Kesavananda Bharati's
case, (1973) 4 sec 225. The contentions of the
respondent are these: First, under Article 368 only general
principles governing the organs of the State and the basic
principles can be laid down. An amendment of the F
Constitution does not contemplate any decision in respect
of individual cases. Clause (4) of Article 329-A is said to
be exercise of a purely judicial power which is not included
in the constituent power conferred by Article 368.
G
xxx xxx xxx
20. Fifth, clause (4) destroys not only judicial review but
also separation of power. The order of the High Court
declaring the election to be void is declared valid (lie void).
The cancellation of the judgment is denial of political justice H
178 SUPREME COURT REPORTS [2014] 10 S.C.R.
A which is the basic structure of the Constitution.
xxx xxx xxx
52. Judicial review in election disputes is not a
compulsion. Judicial review of decisions in election
B disputes may be entrusted by law to a judicial tribunal. If it
is to a tribunal or to the High Court the judicial review will
be attracted either under the relevant law providing for
appeal to this Court or Article 136 may be attracted. Under
Article 329(b) the contemplated law may vest the power
c to entertain election petitions in the House itself which may
determine the dispute by a resolution after receiving a
report from a special committee. In such cases judicial
review may be eliminated without involving amendment of
the Constitution ...... If judicial review is excluded the court
D is not in a position to conclude that principles of equality
have been violated.
xxx xxx xxx
153. The contentions of the respondent that the
E Amendment Acts of 1974 and 1975 are subject to basic
features or basic structure or basic framework fails on two
grounds. First, legislative measures are not subject to the
theory of basic features or basic structure or basic
framework. Second, the majority view in Kesavananda
F Bharati's case (supra) is that the Twenty-ninth Amendment
which put the two statutes in the Ninth Schedule and Article
31-B is not open to challenge on the ground of either
damage to or destruction of basic features, basic structure
or basic framework or on the ground of violation of
G fundamental rights."
The views expressed by H.R. Khanna, J. are now being
reproduced below:-
"175. The proposition that the power of amendment under
H Article 368 does not enable Parliament to alter the basic
MADRAS BAR ASSOCIATION v. UNION OF INDIA 179
[JAGDISH SINGH KHEHAR, J.]
structure of framework of the Constitution was laid down A
by this Court by a majority of 7 to 6 in the case of His
Holiness Kesavananda Bharati v. State of Kerala. (1973)
4 sec 225. Apart from other reasons which were given
in some of the judgments of the learned Judges who
constituted the majority. the majority dealt with the B
connotation of the word "amendment''. It was held that the
words "amendment of the Constitution" in Article 368 could
not have the effect of destroying or abrogating the basic
structure of the Constitution. Some of us who were parties
to that case took a different view and came to the c
conclusion that the words "amendment of the Constitution"
in Article 368 did not admit of any limitation. Those of us
who were in the minority in Kesavananda Bharati's case
(supra) may still hold the same view as was given
expression to in that case. For the purpose of the present
0
case. we shall have to proceed in accordance with the law
as laid down by the majority in that case.
176. Before dealing with the question as to whether the
impugned amendment affects the basic structure of the
Constitution, I may make it clear that this Court is not E
concerned with the wisdom behind or the propriety of the
impugned constitutional amendment. These are matters
essentially for those who are vested with the authority to
make the constitutional amendment. All that this Court is
concerned with is the constitutional validity of the impugned F
amendment.
xxx xxx xxx
210. It has been argued in support of the constitutional
validity of clause (4) that as a result of this amendment. G
the validity of one election has been preserved. Since the
basic structure of the Constitution. according to the
submission. continues to be the same, clause (4) cannot
be said to be an impermissible piece of constitutional
amendment. The argument has a seeming plausibility H
180 SUPREME COURT REPORTS [2014] 10 S.C.R.
A about it, but a deeper reflection would show that it is
vitiated by a basic fallacy. Law normally connotes a rule
or norm which is of general application. It may apply to all
the persons or class of persons or even individuals of a
particular description. Law prescribes the abstract
8 principles by the application of which individual cases are
decided. Law, however, is not what Blackstone called "a
sentence". According to Roscoe Pound, law, as
distinguished from laws, is the system of authoritative
materials for grounding or guiding judicial and
c administrative action recognised or established in a
politically organized society (see p. 106, Jurisprudence,
Vol. Ill). Law is not the same as judgment. Law lays down
the norm in abstract terms with a coercive power and
sanction against those guilty of violating the norm, while
judgment represents the decision arrived at by the
D
application of law to the concrete facts of a case.
Constitutional law relates to the various organs of a State;
it deals with the structure of the Government. the extent of
distribution of its powers and the modes and principles of
its operation. The Constitution of India is so detailed that
E some of the matters which in a brief Constitution like that
of the United States of America are dealt with by statutes
form the subject-matter of various articles of our
Constitution. There is, however, in a constitutional law, as
there is in the very idea of law, some element of generality
F or general application. It also carries with it a concept of
its applicability in future to situations which may arise in
that context. If there is amendment of some provision of
the Constitution and the amendment deals with matters
which constitute constitutional law, in the normally accepted
G sense, the court while deciding the question of the validity
of the amendment would have to find out, in view of the
majority opinion in Kesavananda Bharati's case (supra),
as to whether the amendment affects the basic structure
of the Constitution. The constitutional amendment
H contained in clause (4) with which we are concerned in the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 181
[JAGDISH SINGH KHEHAR, J.]
present case is, however, of an altogether different nature. A
Its avowed object is to confer validity on the election of the
appellant to the Lok Sabha in 1971 after that election had
been declared to be void by the High Court and an appeal
against the judgment of the High Court was pending in this
Court. In spite of our query, we were not referred to any B
precedent of a similar amendment of any Constitution of
the world. The uniqueness of the impugned constitutional
amendment would not, however, affect its validity. If the
constituent authority in its wisdom has chosen the validity
of a disputed election as the subject-matter of a c
constitutional amendment, this Court cannot go behind that
wisdom. All that this Court is concerned with is the validity
of the amendment. I need not go into the question as to
whether such a matter, in view of the normal concept of
constitutional law, can strictly be the subject of a 0
constitutional amendment. I shall for the purpose of this
case assume that such a matter can validly be the subject-
matter of a constitutional amendment. The question to be
decided is that if the impugned amendment of the
Constitution violates a principle which is part of the basic
E
structure of the Constitution. can it enjoy immunity from an
attack on its validity because of the fact that for the future.
the basic structure of the Constitution remains unaffected.
The answer to the above question. in my opinion. should
be in the negative. What has to be seen in such a matter
is whether the amendment contravenes or runs counter to F
an imperative rule or postulate which is an integral part of
the basic structure of the Constitution. If so, it would be an
impermissible amendment and it would make no
difference whether it relates to one case or a large number
of cases. If an amendment striking at the basic structure G
of the Constitution is not permissible. it would not acquire
validity by being related only to one case. To accede to
the argument advanced in support of the validity of the
amendment would be tantamount to holding that even
though it is not permissible to change the basic structure H
182 SUPREME COURT REPORTS [2014] 10 S.C.R.
A' of the Constitution. whenever the authority concerned
deems it proper to make such an amendment. it can do
so and circumvent the bar to the making of such an
amendment by confining it to one case. What is prohibited
cannot become permissible because of its being confined
B to one matter."
On the issue in hand, K.K. Mathew, J.'s views were as under:-
"318. The major problem of human society is to combine
that degree of liberty without which law is tyranny with that
c degree of law without which liberty becomes licence; and,
the difficulty has been to discover the practical means of
achieving this grand objective and to find the opportunity
for applying these means in the ever-shifting tangle of
human affairs. A large part of the effort of man over
D centuries has been expended in seeking a solution of this
great problem. A region of law, in contrast to the tyranny
of power, can be achieved only through separating
appropriately the several powers of the Government. If the
lawmakers should also be the constant administrators and
E dispensers of law and justice. then. the people would be
left without a remedy in case of injustice since no appeal
can lie under the fiat against such a supremacy. And, in
this age-old search of political philosophers for the secret
of sound Government, combined with individual liberty, it
was Montesquieu who first saw the light. He was the first
F
among the political philosophers who saw the necessity
of separating judicial power from the executive and
legislative branches of Government. Montesquieu was the
first to conceive of the three functions of Government as
exercised by three organs, each juxtaposed against
G others. He realised that the efficient operation of
Government involved a certain degree of overlapping and
that the theory of checks and balances required each organ
to impede too great an aggrandizement of authority by the
other two powers. As Holdsworth says, Montesquieu
H convinced the world that he had discovered a new
KifADRAS BAR ASSOCIATION v. UNION OF INDIA 183·
[JAGDISH SINGH KHEHAR, J.]
constitutional principle which was universally valid. The A
doctrine of separation of governmental powers is not a
mere theoretical, philosophical concept. It is a practical,
work-a-day principle. The division of Government into three
branches does not imply, as its critics would have us think,
three watertight compartments. Thus. legislative B
impeachment'of executive officers .or judges. executive
veto over legislation. judicial review of administrative or
legislative actions are treated as partial exceptions which
need explanation. (See generally: "the Doctrine of
Separation of Powers and its present day significance" by c
T. Vanderbilt.)
)()()( )()()( )()()(
343. I think clause (4) is bad for the reasons which I have
already summarised. Clauses (1) to (3) of Article 329-A 0
are severable but I express no opinion on their validity as
it is not necessary for deciding this case.
)()()( )()()( )()()(
361. I therefore hold that these Acts are not liable to be E
challenged on any of the grounds argued by Counsel."
57. Insofar as the third judgment in the series of judgments
is concerned, reference may be made to Minerva Mills Ltd. &
Ors. v. Union of India & Ors., (1980) 2 SCC 591, as also,
Minerva Mills Ltd. & Ors. v. Union of India & Ors., (1980) 3 F
SCC 625. Insofar as the former of the above two judgments is
concerned, the same delineates the pointed controversy dealt
with by a constitution bench of 5 Judges of this Cou.rt. The issue
adjudicated upon, pertained to the constitutional validity of the
Constitution (Forty-second Amendment) Act, 1976, and more G
particularly, Sections 4 and 55 thereof, whereby Articles 31 C
and 368 of the Constitution, came to be amended. The majority
view was expressed in the ratio of 4:1, P.N. Bhagwati, J. (as
he then was) having rendered the dissent. The majority arrived
at the conclusion, that Section 4 of the Constitution (Forty- H
184 SUPREME COURT REPORTS [2014] 10 S.C.R.
A second Amendment) Act, 1976 was beyond the amending
power of the Parliament and was void, as it had the effect of
violating the basic or essential features of the Constitution and
destroying the "basic structure" of the Constitution, by a total
exclusion of a challenge to any law, even on the ground that it
B was inconsistent with, or had taken away, or had abridged any
of the rights, conferred by Articles 14 or 19 of the Constitution.
Likewise, Section 55 of the Constitution (Forty-second
Amendment) Act was struck down as unconstitutional, as the
same was beyond the amending power of the Parliament.
C Relevant observations recorded in the instant judgment
pertaining to the issue in hand, are being extracted hereunder.
The opinion expressed by Y.V. Chandrachud, CJ, A.C. Gupta,
N.L. Untawalia and P.S. Kailasam, JJ. on the subject in hand,
was to the following effect:-
D "68. We must ... mention, what is perhaps not fully realised,
that Article 31-C speaks of laws giving effect to the "policy
of the State", "towards securing all or any of the principles
laid down in Part IV". In the very nature of things it is difficult
for a court to determine whether a particular law gives
E effect to a particular policy. Whether a law is adequate
enough to give effect to the policy of the State towards
securing a directive principle is always a debatable
question and the courts cannot set aside the law as invalid
merely because, in their opinion, the law is not adequate
F enough to give effect to a certain policy. In fact. though the
clear intendment of Article 31-C is to shut out all judicial
review, the argument of the learned Additional Solicitor-
General calls for a doubly or trebly extensive judicial review
than is even normally permissible to the courts. Be it
remembered that the power to enquire into the question
G
whether there is a direct and reasonable nexus between
the provisions of a law and a directive principle cannot
confer upon the courts the power to sit in judgment over
the policy itself of the State. At the highest. courts can.
under Article 31-C, satisfy themselves as to the identity of
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 185
[JAGDISH SINGH KHEHAR, J.]
the law in the sense whether it bears direct and reasonable A
nexus with a directive principle. If the court is satisfied as
to the existence of such nexus. the inevitable consequence
provided for by Article 31-C must follow. Indeed, if there
is one topic on which all the 13 Judges in Kesavananda
Bharati, (1973) 4 SCC 225, were agreed, it is this: that B
the only question open to judicial review under the
unamended Article 31-C was whether there is a direct and
reasonable nexus between the impugned law and the
provisions of Article 39(b) and (c) Reasonableness is
evidently regarding the nexus and not regarding the law. 1! c
is therefore impossible to accept the contention that it is
open to the courts to undertake the kind of enquiry
suggested by the Additional Solicitor General. The attempt
therefore to drape Article 31-C into a democratic outfit
under which an extensive judicial review would be 0
permissible must fail.
xxx xxx xxx
73. It was finally urged by the learned Attorney General that
if we uphold the challenge to the validity of Article 31-C.
E
the validity of clauses (2) to (6) of Article 19 will be gravely
imperilled because those clauses will also then be liable
to be struck down as abrogating the rights conferred by
Article 19(1) which are an essential feature of the
Constitution. We are unable to accept this contention.
Under clauses (2) to (6) of Article 19. restrictions can be F·
imposed only if they are reasonable and then again. they
can be imposed in the interest of a stated class of subjects
only. It is for the courts to decide whether restrictions are
reasonable and whether they are in the interest of the
particular subject. Apart from other basic dissimilarities. G
Article 31-C takes away the power of judicial review to an
extent which destroys even the semblance of a comparison
between its provisions and those of clauses (2) to (6) of
Article 19. Human ingenuity, limitless though it may be, has
yet not devised a system by which the liberty of the people H
186 SUPREME COURT REPORTS [2014] 10 S.C.R.
A can·.be protected except through the intervention of courts
of law.
xxx xxx xxx
75. These then are our reasons for the Order (See Minerva
B Mills Ltd. vs. Union of India, (1980) 2 SCC 591) which
we passed on May 9, 1980 to the following effect: (SCC
pp. 592-593, paras 1 & 2)
"Section 4 of the Constitution (Forty-second
Amendment) Act is beyond the amending power of
c the Parliament and is void since it damages the
basic or essential features of the Constitution and
destroys its ba.5ic structure by a total exclusion of
challenge to any law on the ground that it is
inconsistent with, or takes away or abridges any of
D the rights conferred by Article 14 or Article 19 of the
Constitution, if the law is for giving effect to the
policy of the State towards securing all or any of the
principles laid down in Part IV of the Constitution.
E Section 55 of the Constitution (Forty-second
Amendment) Act is beyond the amending power of
the Parliament and is void since it removes all
limitations on the power of the Parliament to amend
the Constitution and confers power upon it to
F amend the Constitution so as to damage or destroy
its basic or essential features or its basic structure."
In order to appreciate the minority view on the issue,
reference may be made to the following observations of P.N.
Bhagwati, J.:-
G
"87. It is a fundamental principle of our constitutional
scheme. and I have pointed this out in the preceding
paragraph, that every organ of the State. every authority
under the Constitution. derives its power from the
Constitution and has to act within the limits of such power.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 187
[JAGDISH SINGH KHEHAR, J.]
But then the question arises as to which authority must A
decide what are the limits on the power conferred upon
each organ or instrumentality of the State and whether such
limits are transgressed or exceeded. Now there are three
main departments of the State amongst which the powers
of government are divided; the executive, the legislature 8
and the judiciary. Under our Constitution we have no rigid
separation of powers as in the United States of America,
but there is a broad demarcation, though, having regard
to the complex nature of governmental functions, certain
degree of overlapping is inevitable. The reason for this c
broad separation of powers is that "the concentration of
powers in any one organ may" to quote the words of
Chandrachud, J., (as he then was) in Indira Gandhi case,
1975 Supp SCC 1, "by upsetting that fine balance between
the three organs, destroy the fundamental premises of a 0
democratic government to which we are pledged". Take
for example, a case where the executive which is in charge
of administration acts to the prejudice of a citizen and a
question arises as to what are the powers of the executive
and whether the executive has acted within the scope of
E
its powers. Such a question obviously cannot be left to the
executive to decide and for two very good reasons. First.
the decision of the question would depend upon the
interpretation of the Constitution and the laws and this
would pre-eminently be a matter fit to be decided by the
judiciary, because it is the judiciary which alone would be F
possessed of expertise in this field and secondly, the
constitutional and legal protection afforded to the citizen
would become illusory, if it were left to the executive to
determine the legality of its own action. So also if the
legislature makes a law and a dispute arises whether in G
making the law the legislature has acted outside the area
of its legislative competence or the law is violative of the
fundamental rights or of any other provisions of the
Constitution, its resolution cannot. for the same reasons,
be left to the determination of the legislature, The H
188 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Constitution has. therefore. created an independent
machinery for resolving these disputes and this
independent machinery is the judiciary which is vested with
the power of judicial review to determine the legality of
execuiive action and the validity of legislation passed by
B the legislature. It is the solemn duty of the judiciary under
the Constitution to keep the different organs of the State
such as the executive and the legislature within the limits
of the power conferred upon them by the Constitution. This
power of judicial review is conferred on the judiciary by
c Articles 32 and 226 of the Constitution. Speaking about
draft Article 25, corresponding to present Article 32 of the
Constitution, Dr Ambedkar, the principal architect of our
, . Constitution, said in the Constituent Assembly on
December 9, 1948:
D "If I was asked to name any particular Article in this
Constitution as the most important - an Article
without which this Constitution would be a nullity -
I could not refer to any other Article except this one.
It is the very soul of the Constitution and the very
E heart of it and I am glad that the House has realised
its importance. (CAD, Vol. 7, p.953)"
It is a cardinal principle of our Constitution that no one
howsoever highly placed and no authority however lofty can
claim to be the sole judge of its power under the
F Constitution or whether its action is within the confines of
such power laid down by the Constitution. The judiciary is
the interpreter of the Constitution and to the judiciary is
assigned the delicate task to determine what is the power
conferred on each branch of government. whether it is
G limited. and if so. what are the limits and whether any action
of that branch transgresses such limits. It is for the judiciary
to uphold the constitutional values and to enforce the
constitutional limitations. That is the essence of the rule of
law, which inter alia requires that "the exercise of powers
H by the government whether it be the legislature or the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 189
[JAGDISH SINGH KHEHAR, J.]
executive or any other authority, be conditioned by the A
Constitution and the law". The power of judicial review is
an integral part of our constitutional system and without
it. there will be no government of laws and the rule of law
would become a teasing illusion and a promise of
unreality. I am of the view that if there is one feature of our B
Constitution which. more than any other. is basic and
fundamental to the maintenance of democracy and the rule
of law. it is the power of judicial review and it is
unquestionably. to my mind. part of the basic structure of
the Constitution. Of course. when I say this I should not be c
taken to suggest that effective alternative institutional
mechanisms or arrangements for judicial review cannot
be made by Parliament. But what I wish to emphasise is
that judicial review is a vital principle of our Constitution
and it cannot be abrogated without affecting the basic
D
structure of the Constitution. If by a constitutional
amendment, the power of judicial review is taken away
and it is provided that the validity of any law made by the
legislature shall not be liable to be called in question on
any ground, even if it is outside the legislative competence
of the legislature or is violative of any fundamental rights, E
it would be nothing short of subversion of the Constitution,
for it would make a mockery of the distribution of
legislative powers between the Union and the States and
render the fundamental rights meaningless and futile. So
also if a constitutional amendment is made which has the F
effect of taking away the power of judicial review and
providing that no amendment made in the Constitution
shall be liable to be questioned on any ground. even if
such amendment is violative of the basic structure and.
therefore. outside the amendatorv power of Parliament. G
it would be making Parliament sole judge of the
constitutional validity of what it has done and that would.
in effect and substance. nullify the limitation on the
amending power of Parliament and affect the basic
structure of the Constitution. The conclusion must therefore H
190 SUPREME COURT REPORTS [2014] 10 S.C.R.
A inevitably follow that clause (4) of Article 368 is
unconstitutional and void as damaging the basic structure
of the Constitution.
88. That takes us to clause (5) of Article 368. This clause
opens with the words "for the removal of doubts" and
B
proceeds to declare that there shall be no limitation
whatever on the amending power of Parliament under
Article 368. It is difficult to appreciate the meaning of the
opening words "for the removal of doubts" because the
majority decision in Kesavananda Bharati case (supra)
c clearly laid down and left no doubt that the basic structure
of the Constitution was outside the competence of the
amendatory power of Parliament and in Indira Gandhi
case (supra), all the judges unanimously accepted theory
of the basic structure as a theory by which the validity of
D the amendment impugned before them, namely, Ar!icle
329-A(4) was to be judged. Therefore. after the-decisions
in Kesavananda Bharati case (supra) and Indira Gandhi
case (supra). there was no doubt at all that the amendatory
power of Parliament was limited and it was not competent
E to Parliament to alter the basic structure of the Constitution
and clause (5) could not remove the doubt which did not
exist. What clause (5) really sought to do was to remove
the limitation on the amending power of Parliament and
convert it from a limited power into an unlimited one. This
F was clearly and indubitably a futile exercise on the part of
Parliament. I fail to see how Parliament which has only a
limited power of amendment and which cannot alter the
basic structure of the Constitution can expand its power
of amendment so as to confer upon itself the power of
G repeal or abrogate the Constitution or to damage or
destroy its basic structure. That would clearly be in excess
of the limited amending power possessed by Parliament.
The Constitution has conferred only a limited amending
power on Parliament so that it cannot damage or destroy
H the basic structure of the Constitution and Parliament
MADRAS BAR ASSOCIATION v. UNION OF INDIA 191
[JAGDISH SINGH KHEHAR, J.]
cannot by exercise of that limited amending power convert A
that very power into an absolute and unlimited power. If it
were permissible to Parliament to enlarge the limited
amending power conferred upon it into an absolute power
of amendment, then it was meaningless to place a
limitation on the original power of amendment. It is difficult B
to appreciate how Parliament having a limited power of
amendment can get rid of the limitation by exercising that
very power ana convert it into an absolute power. Clause
(5) of Article 368 which sought to remove the limitation on
the amending power of Parliament by making it absolute c
must therefore be held to be outside the amending power
of Parliament. There is also another ground on which the
validity of this clause can be successfully assailed. This
clause seeks to convert a controlled Constitution into an
uncontrolled one by removing the limitation on the
0
amending power of Parliament which. as pointed out
above. is itself an essential feature of the Constitution and
it is therefore violative of the basic structure. I would in the
circumstances hold clause (5) of Article 368 to be
unconstitutional and void."
E
58. Reference may now be made to another decision of
this Court rendered by a bench of 7 Judges, namely, S.P. Gupta
v. Union of India, 1981 (Supp.) SCC 87. P.N. Bhagwati, J. (as
· he then was) opined as under:-
F
"Concept of Independence of the Judiciary
27. Having disposed of the preliminary objection in regard
to locus standi of the petitioners, we may now proceed to
consider the questions which arise for determination in
these writ petitions. The questions are of great G
constitutional significance affecting the principle of
independence of the judiciary which is a basic feature of
the Constitution and we would therefore prefer to begin the
discussion by making a few prefatory remarks highlighting
what the true function of the judiciary should be in a country H
192 SUPREME COURT REPORTS [2014] 10 S.C.R.
A like India which is marching along the road to social justice
with the banner of democracy and the rule of law. for the
principle of independence of the judiciary is not an abstract
conception but it is a living faith which must derive its
inspiration from the constitutional charter and its
8 nourishment and sustenance from the constitutional values.
It is necessary for every Judge to remember constantly and
continually that our Constitution is not a non-aligned
national charter. It is a document of social revolution which
casts an obligation 'On every instrumentality including the
c judiciary, which is a separate but equal branch of the State,
to transform the status quo ante into a new human order
in which justice, social, economic and political will inform
all institutions of national life and there will be equality of
status and opportunity for all ...... Now this approach to the
judicial function may be alright for a stable and static
D
society but not for a society pulsating with urges of gender
justice, worker justice, minorities justice, dalit justice and
equal justice, between chronic unequals. Where the
contest is between those who are socially or economically
unequal, the judicial process may prove disastrous from
E the point of view of social justice, if the Judge adopts a
merely passive or negative role and does not adopt a
positive and creative approach. The judiciary cannot
remain a mere bystander or spectator but it must become
an active participant in the judicial process ready to use
F law in the service of social justice through a pro-active goal-
oriented approach. But this cannot be achieved unless we
have judicial cadres who share the fighting faith of the
Constitution and who are imbued with the constitutional
values. The necessity of a judiciary which is in tune with
G the social philosophy of the Constitution has nowhere been
better emphasised than in the words of Justice Krishna Iyer
which we quote:
"Appointment of Judges is a serious process
H where judicial expertise, legal learning, life's
MADRAS BAR ASSOCIATION v. UNION OF INDIA 193
[JAGDISH SINGH KHEHAR, J.]
experience and high integrity are components, but A
above all are two indispensables - social
philosophy in active unison with the socialistic
articles of the Constitution, and second, but equally
important, built-in resistance to pushes and
pressures by class interests, private prejudices, B
government threats and blandishments, party
loyalties and contrary economic and politicial
ideologies projecting into pronouncements.
(Mainstream, November 22, 1980)"
Justice Krishna Iyer goes on to say in his inimitable style:
c
"Justice Cardozo approvingly quoted President Theodore
Roosevelt's stress on the social philosophy of the Judges,
which shakes and shapes the course of a nation and,
therefore, the choice of Judges for the higher Courts which D
makes and declares the law of the land, must be in tune
with the social philosophy of the Constitution. Not mastery
of the law alone, but social vision and creative
craftsmanship are important inputs in successful justicing.
(Mainstream, November 22, 1980)" E
What is necessary is to have Judges who are prepared
to fashion new tools, forge new methods, innovate new
strategies and evolve a new jurisprudence, who are judicial
statesmen with a social vision and a creative faculty and
who have, above all, a deep sense of commitment to the F
Constitution with an activist approach and obligation for
accountability, not to any party in power nor to the
opposition nor to the classes which are vociferous but to
the half-hungry millions of India who are continually denied
their basic human rights. We need Judges who are alive G
to the socio-economic realities of Indian life, who are
anxious to wipe every tear from every eye, who have faith
in the constitutional values and who are ready to use law
as an instrument for achieving the constitutional objectives.
This has to be the broad blueprint of the appointment H
194 SUPREME COURT REPORTS [2014] 10 S.C.R.
A project for the higher echelons of judicial service. It is only
if appointments of Judges are made with these
considerations weighing predominantly with the appointing
authority that we can have a truly independent judiciarv
committed only to the Constitution and to the people of
B India. The concept of independence of the judiciarv is a
noble concept which inspires the constitutional scheme
and constitutes the foundation on which rests the edifice
of our democratic politv. If there is one principle which runs
through the entire fabric of the Constitution. it is the
c principle of the rule of law and under the Constitution. it is
the judiciarv which is entrusted with the task of keeping
everv organ of the State within the limits of the law and
thereby making the rule of law meaningful and effective. It
is to aid the judiciarv in this task that the power of judicial
review has been conferred upon the judiciary and it is by
D
exercising this power which constitutes one of the most
potent weapons in armory of the law. that the judiciary
seeks to protect the citizen against violation of his
constitutional or legal rights or misuse or abuse of power
by the State or its officers. The judiciary stands between
E the citizen and the State as a bulwark against executive
excesses and misuse or abuse of power by the executive
and therefore it is absolutely essential that the judiciary
must be free from executive pressure or influence and this
has been secured by the Constitution-makers by making
F elaborate provisions in the Constitution to which detailed
reference has been made in the judgments in Union of India
vs. Sankalchand Himmatlal Sheth, (1977) 4 SCC 193. But
it is necessary to remind ourselves that the concept of
independence of the judiciary is not limited only to
G independence from executive pressure or influence but it
is a much wider concept which takes within its sweep
independence from many other pressures and prejudices.
It has many dimensions, namely. fearlessness of other
power centres. economic or political. and freedom from
H prejudices acquired and nourished by the class to which
MADRAS BAR ASSOCIATION v. UNION OF INDIA 195
[JAGDISH SINGH KHEHAR, J.]
the Judges belong. If we may again quote the eloquent A
words of Justice Krishna Iyer:
"Independence of the Judiciary is not genuflexion;
nor is it opposition to every proposition of
Government. It is neither Judiciary made to
Opposition measure nor Government's pleasure. B
(Mainstream, November 22, 1980)
The tycoon, the communalist, the parochialist, the
faddist, the extremist and radical reactionary lying
coiled up and subconsciously shaping judicial C
mentations are menaces to judicial independence
when they are at variance with Parts Ill and IV of the
Paramount Parchment."
Judges should be of stern stuff and touqh fibre, unbending
before power, economic or political, and they must uphold o
the core principle of the rule of law which says, "Be you
ever so high. the law is above you." This is the principle of
independence of the judiciary which is vital for the
establishment of real participatory democracy,
maintenance of the rule of law as a dynamic concept and E
delivery of social justice to the vulnerable sections of the
community. It is this principle of independence of the
judiciary which we must keep in mind while interpreting the
relevant provisions of the Constitution."
S. Murtaza Fazal Ali, J., on the issue of "judicial review" F
and the "basic structure", opined as under:-
"332. It would appear that our Constitution has devised a
wholesome and effective mechanism for the appointment
of Judges which strikes a just balance between the judicial
and executive powers so that while the final appointment G
vests in the highest authority of the executive. the power
is subject to a mandatory consultative process which by
convention is entitled to great weight by the President.
Apart from these safety valves. checks and balances at
every stage. where the power of the President is abused H
196 SUPREME COURT REPORTS [2014] 10 S.C.R.
A or misused or violates any of the constitutional safeguards
it is always subject to judicial review. The power of judicial
review. which has been conceded by the Constitution to
the judiciary, is in our opinion the safest possible
safeguard not only to ensure independence of judiciary but
B also to prevent it from the vagaries of the executive.
Another advantage of the method adopted by our
Constitution is that by vesting the entire power in the
President, the following important elements are introduced:
(1) a popular element in the matter of administration
c of justice,
(2) linking with judicial system the dynamic goals of
a progressive society by subjecting the principles
of governance to be guided by the Directive
Principles of State Policy,
D
(3) in order to make the judiciary an effective and
powerful machinery, the Constitution contains a
most onerous and complicated system by which
Judges can be removed under Article 124(4), which
E in practice is almost an impossibility,
(4) in order to create and subserve democratic
processes the power of appointment of the judiciary
in the executive has been so vested that the head
of the executive which functions through the Council
F of Ministers, which is a purely elected body, is
made accountable to the people.
xxx xxx xxx
336. This Court has in several cases held that the condition
G of consultation which the Governor has to exercise implies
that he would have to respect the recommendations of the
High Court and cannot turn it down without cogent reasons
and even if he does so, it is manifest that his order is
always subject to judicial review on the ground of mala fide
or exceeding his jurisdiction.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 197
[JAGDISH SINGH KHEHAR, J.]
xxx )()()( )()()( A
345. This, therefore, disposes of all the contentions of the
counsel for the parties so far as the various aspects of
interpretation of Article 222 are concerned. On a
consideration, therefore, of the facts, circumstances and B
authorities the position is as follows:
(1) that Article 222 expressly excludes 'consent' and
it is not possible to read the word 'consent' into
Article 222 and thereby whittle down the power
conferred on the President under this Article, C
(2) that the transfer of a Judge or a C.J. of a High
Court under Article 222 must be made in public
interest or national interest,
D
(3) that non-consensual transfer does not amount
to punishment or involve any stigma,
(4) that in suitable cases where mala fide is writ
large on the face of it, an order of transfer made
by the President would be subject to judicial review, E
(5) that the transfer of a Judge from one High Court
to another does not amount to a first or fresh
appointment in any sense of the term,
(6) that a transfer made under Article 222 after F
complying with the conditions and circumstances
mentioned above does not mar or erode the
independence of judiciary.
xxx )()()( xxx G
402. It has been vehemently argued by Mr. Seervai as
also by Mr. Sorabjee who followed him that their main
concern is that independence of judiciary should be
maintained at all costs. Indeed, if they are really concerned
that we should build up an independent judiciary then it is H
198 SUPREME COURT REPORTS [2014] 10 S.C.R.
A absolutely essential that new talents from outside should
be imported in every High Court either to man it or to head
it so that they may generate much greater confidence in
the people than the local Judges. The position of a C.J. is
indeed a very high constitutional position and our
B Constitution contains sufficient safeguards to protect both
his decision-making process and his tenure. It is a well-
known saying that power corrupts and absolute power
corrupts absolutely. As man is not infallible, so is a Chief
Justice, though a person holding a high judicial post is
c likely to be incorruptible because of the quality of sobriety
and restraint that the judicial method contains. Even so, if
a C.J. is from outside the State, the chances of his
misusing his powers are reduced to the absolute minimum.
We have pointed out that the power to formulate or evolve
this policy clearly lies within the four-corners of Article 222
D
itself which contains a very wide power conditioned only
by consultation with C.J.I. who is the highest judicial
authority in the country. It is always open to the President,
which in practice means the Central Government, to lay
down a policy, norms and guidelines according to which
E the presidential powers are to be exercised and once
these norms are followed, the powers of the President
would be beyond judicial review."
On the issue in hand, V.D. Tulzapurkar, J. expressed the
F following view:-
"624. As regards the constitutional convention or practice
and the undertaking which have been pressed into service
in relation to Bar recruits as Additional Judges for basing
their right to be considered for their continuance on the
G expiry of their initial term, the learned Attorney-General
appearing for the Union of India raised a two fold
contention. Regarding the former he urged that a
constitutional convention or practice, howsoever
wholesome, cannot affect, alter or control the plain
H meaning of Article 224(1) which according to him gives
MADRAS BAR ASSOCIATION v. UNION OF INDIA 199
[JAGDISH SINGH KHEHAR, J.]
absolute power and complete discretion to the President A
in the matter of continuance of sitting Additional Judges
on the expiry of their initial term, the pendency of arrears
being relevant only for deciding whether or not Additional
Judges should be appointed and not relevant with regard
to a particular person to be appointed. As regards the B
undertaking he pointed out that the usual undertaking
obtained from a Member of the Bar in all High Courts -
and for that matter even the additional undertaking that is
being obtained in the Bombay High Court if properly read
will show that it merely creates a binding obligation on the c
concerned Member of the Bar but does not create any
obligation or commitment on the part of the appointing
authority to make the offer of permanent Judgeship to him.
It is difficult to accept either of these contentions of the
learned Attorney General. It was not disputed before us
D
that constitutional conventions and practices have
importance under unwritten as well as written Constitutions
and the position that conventions have a role to play in
interpreting articles of a Constitution is clear from several
decided cases. In U.N.R. Rao v. Indira Gandhi, (1971) 2
E
SCC 63, Chief Justice Sikri observed thus: (SCC p. 64,
para 3)
"It was said that we must interpret Article 75(3)
according to its own terms regardless of the
conventions that prevail in the United Kingdom. If F
the words of an Article are clear, notwithstanding
any relevant convention, effect will no doubt be given
to the words. But it must be remembered that we
are interpreting a Constitution and not an Act of
Parliament, a Constitution which establishes a G
Parliamentary system of Government with a
Cabinet. In trying to understand one may well keep
in mind the conventions prevalent at the time the
Constitution was framed."
In State of Rajasthan v. Union of India, (1977) 3 SCC 592, H
200 SUPREME COURT REPORTS [2014] 10 S.C.R.
A also the importance of a constitutional convention or
practice by way of crystallising the otherwise vague and
loose content of a power to be found in certain article has
been emphasised. In the State of W.B. v. Nripendra Nath
Bagchi, AIR 1966 SC 447, the entire interpretation of the
B concept of 'vesting of control' over District Courts and
Courts subordinate thereto in the High Court was animated
by conventions and practices having regard to the history,
object and purpose that lay behind the group of relevant
articles, the principal purpose being, the securing of the
c independence of the subordinate judiciary. It is true that no
constitutional convention or practice can affect, alter or
control the operation of any article if its meaning is quite
plain and clear but here Article 224(1) merely provides for
situations when Additional Judges from duly qualified
persons could be appointed to a High Court and at the
D
highest reading the article with Section 14 of the General
Clauses Act it can be said that the power conferred by that
article may be exercised from time to time as occasion
requires but on the question as to whether when the
occasion arises to make appointment on expiry of the term
E of a sitting Additional Judge whether he should be
continued or a fresher or outsider could be appointed by
ignoring the erstwhile incumbent even when arrears
continue to obtain in that High Court the article is silent and
not at all clear and hence the principle invoked by the
F learned Attorney-General will not apply. On the other hand,
it will be proper to invoke in such a situation the other well-
settled principle that in construing a constitutional provision
the implications which arise from the structure of the
Constitution itself or from its scheme may legitimately be
G made and looking at Article 224(1) from this angle a
wholesome constitutional convention or practice that has
grown because of such implications will have to be borne
in mind especially when it servesto safeguard one of the
basic features which is the cardinal faith underlying our
H Constitution, namely, independence of the judiciary. In
MADRAS BAR ASSOCIATION v. UNION OF INDIA 201
[JAGDISH SINGH KHEHAR, J.]
other words a limitation on the otherwise absolute power A
and discretion contained in Article 224(1) is required to
be read into it because of the clear implication arising from
the said cardinal faith which forms a fundamental pillar
supporting the basic structure of the Constitution, as
otherwise the exercise of the power in the absolute manner B
as suggested will be destructive of the same. That it is not
sound approach to embark upon 'a strict literal reach' of
any constitutional provision in order to determine its true
ambit and effect is strikingly illustrated in the case of Article
368 which came up for consideration before this Court in c
Kesavananda Bharati case, (1973) 4 SCC 225, where this
Court held that the basic or essential features of the
Constitution do act as fetters or limitations on the otherwise
wide amending power contained in that article. In Australia
limitations on the law-making powers of the Parliament of 0
the Federal Commonwealth over the States were read into
the concerned provisions of the Constitution because of
implications arising from the very federal nature of the
Constitution: (vide Lord Mayor Councillors and Citizens of
the City of Melbourne v. Commonwealth, 74
Commonwealth LR 31, and the State of Victoria v.
E
Commonwealth of Australia, 122 Commonwealth LR 353).
As regards the undertakings of the types mentioned
above, it is true that strictly and legally speaking these
undertakings only create a binding obligation on the
concerned Member of the Bar and not on the appointing F
authority but it cannot be forgotten that when such
undertakings were thought of, the postulate underlying the
same was that there was no question of the appointing
authority not making the offer of permanent Judgeship to
the concerned Member of the Bar but that such an offer G
would be made and upon the same being made the sitting
Additional Judge recruited fror1 the Bar should not decline
to accept it and revert to the Bar. I am therefore clearly of
the view that the aforesaid convention or practice and the
undertaking serve the cause of public interest in two H
202 SUPREME COURT REPORTS [2014] 10 S.C.R.
A respects as indicated above and those two aspects of
public interest confer upon these sitting Additional Judges
recruited from the Bar a legitimate expectancy and the
enforceable right not to be dropped illegally or at the whim
or caprice of the appointing authority but to be considered
B for continuance in that High Court either by way of extending
their term or making them permanent in preference to
freshers or outsiders and it is impossible to construe
Article 224(1) as conferring upon the appointing authority
absolute power and complete discretion in the matter of
c appointment of Additional Judges to a High Court as
suggested and the suggested construction has to be
rejected. In view of the above discussion it is clear that
there is a valid classification between proposed
appointees for initial recruitment and the sitting Additional
Judges whose cases for their continuance after the expiry
D
of their initial term are to be decided and the two are not
in the same position."
The observations of D.A. Desai, J. are expressed hereunder:-
E "696. It may be briefly mentioned here that Writ Petition
No. 274 of 1981 filed in this Court and Transferred Cases
Nos. 2, 6 and 24 of 1981 were listed to be heard along
with the present batch of cases with a view to avoiding the
repetition of the arguments on points common to both sets
of cases. In the first group of cases the question of
F
construction of Articles 217, 224 and other connected
articles prominently figured in the context of circular of the
Law Minister dated March 18, 1981, seeking consent of
Additional Judges for being appointed as permanent
Judges in other High Courts and the short-term extensions
G
given to Shri O.N. Vohra, Shri S.N. Kumar and Shri S.B.
Wad, Additional Judges of Delhi High Court and the final
non-appointment of Shri O.N. Vohra and Shri S.N. Kumar.
The submission was that the circular of the Law Minister
manifests a covert attempt to transfer Additional Judges
H from one High Court to other High Court without consulting
MADRAS BAR ASSOCIATION v. UNION OF INDIA 203
[JAGDISH SINGH KHEHAR, J.]
the Chief Justice of India as required by Article 222(1) and A
thereby circumventing the majority decision in Union of
India v. Sankalchand Himatlal Sheth, (1977) 4 SCC 193.
The central theme was the scope, ambit and content of
consultation which the President must have with the three
constitutional functionaries set out in Article 217(1 ). In the B
second group of cases, the question arose in the context
of transfer of Shri K.B.N. Singh, Chief Justice of Patna
High Court as Chief Justice of Madras High Court
consequent upon the transfer of Shri M.M. Ismail, Chief
Justice of Madras High Court as Chief Justice of Kerala c
High Court by Presidential Notification dated January 19,
1981, in exercise of the power conferred upon him by
Article 222. The controversy centred down the scope,
ambit and content of consultation that the President must
have with the Chief Justice of India before exercising the
0
power to transfer under Article 222. Thus, the scope, ambit
and content of consultation under Article 217 as also one
of Article 222 which, as Mr Seervai stated, was more or
less the same though the different facets on which
consultation must be focussed may differ in the case of E
transfer and in the case of appointment, figured
prominently in both the groups of cases. The parameters
of scope, ambit and content of consultation both under
Articles 217(1), 222 and 224, were drawn on a wide
canvas to be tested on the touchstone of independence
of judiciary being the fighting faith and fundamental and F
basic feature of the Constitution. It was stated that if the
consultation itself is to provide a reliable safeguard against
arbitrary and naked exercise of power against judiciary,
the procedure of consultation must be so extensive as to
cover all aspects of the matter and it must be made so firm G
and rigid that any contravention or transgression of it would
be treated as me.'a fide or subversive of indeperdence of
judiciary and the decision can be corre'cted by judicial
review. Therefore, at the outset it is necessary to be
properly informed as to the concept of independence of H
204 SUPREME COURT REPORTS [2014] 10 S.C.R.
A judiciary as set out in the Constitution.
697. The entire gamut of arguments revolved principally
round the construction of Articles 217 and 224 in one batch
of petitions and Article 222 in another batch but the canvas
was spread wide covering various other articles of the
B
Constitution, analogous provisions in previous Government
of India Acts, similar provisions in other democratic
constitutions and reports of Law Commission. Rival
constructions canvassed centred upon the pivotal
assumption that independence of judiciary is a basic and
c fundamental feature of the Constitution which has its
genesis in the power of judicial review which enables the
court to declare executive and legislative actions ultra vires
the Constitution. In this connection we are not starting on
a clean slate as the contention in this very form and for an
D avowed object was widely canvassed in Sankalchand
Himatlal Sheth v. Union of India, (1976) 17 Guj LR 101·7
(FB), and in Union of India v. Sankalchand Himatlal Sheth
(supra). Some additional dimensions were added to this
basic concept of independence of judiciary while both the
E parties vied with each other as in the past (see statement
of Shri S.V. Gupte, then Attorney-General in Sheth case
(supra), on proclaiming their commitment to independence
of judiciary though in its scope and content and approach
there was a marked divergence.
F
xxx xxx xxx
771. Now, power is conferred on the President to make
appointment of Judge of Supreme Court after consultation
with such of the Judges of the Supreme Court and of the
G High Courts in the States as the President may deem
necessary. The submission is that the expression 'may
deem necessary' qualifies the expression 'consultation'
and that if he deems otherwise the President can proceed
to make appointment of the Chief Justice of India without
H consultation with any of the Judges of the Supreme Court
MADRAS BAR ASSOCIATION v. UNION OF INDIA 205
[JAGDISH SINGH KHEHAR, J.]
and of the High Courts. In other words, it was submitted A
on behalf of the respondents, the President has a
discretion to consult or not to consult Judges of the
Supreme Court and High Courts before making
appointment of Chief Justice of India. It was pointed out
that where consultation is obligatory it is specifically B
provided and reference was made to the proviso extracted
hereinabove wherein it is stated that it would be obligatory
upon the President to consult the Chief Justice of India
before making appointment of a Judge of the Supreme
Court other than the Chief Justice of India. Undoubtedly, c
the proviso leaves no option to the President but to consult
the Chief Justice of India while making appointment of a
Judge of the Supreme Court other than the Chief Justice
of India, but it is rather difficult to accept the construction
as suggested on behalf of the respondents that in making 0
appointment of the Chief Justice of India the President is
at large and may not consult any functionary in the judicial
branch of the State before making appointment of Chief
Justice of India. The expression 'may deem necessary'
qualifies the number of Judges of the Supreme Court and
E
High Courts to be consulted. What is optional is selection
of number of Judges to be consulted and not the
consultation because the expression 'shall be appointed
after consultation' would mandate consultation. An extreme
submission that the President may consult High Court
Judges for appointment of the Chief Justice of India F
omitting altogether Supreme Court Judges does not
commend to us, because the consultation with 'such of the
Judges of the Supreme Court and of the High Courts'
would clearly indicate that the consultation has to be with
some Judges of the Supreme Court and some Judges of G
the High Courts. The conjunction 'and' is clearly indicative
of the intendment of the framers of the Constitution. If there
was disjunctive 'or' between Supreme Court and High
Courts in sub-article (2) of Article 124 there could have
been some force in the submission that the President may H
206 SUPREME COURT REPORTS [2014] 10 S.C.R.
A appoint Chief Justice of India ignoring the Supreme Court
and after consulting some High Court Judges.
Undoubtedly, sub-article (2) does not cast an obligation to
consult all Judges of the Supreme Court and all Judges
of the High Courts but in practical working the President
B in order to discharge his function of selecting the best
suitable person to be the Chief Justice of India must
choose such fair sprinkling of Supreme Court and High
Court Judges as would enable him to gather enough and
relevant material which would help him in decision-making
c process. Mr Seervai submitted that this Court must avoid
such construction of Article 124 which would enable the
President to appoint Chief Justice of India without
consultation with any judicial functionaries. That is certainly
correct. But then he proceeded to suggest a construction
D where, by a constitutional convention, any necessity of
consultation would be obviated and yet the executive
power to be choosy and selective in appointment of Chief
Justice of India can be controlled or thwarted. He said that
a constitutional convention must be read that the
seniormost amongst the puisne Judges of the Supreme
E
Court should as a rule be appointed as Chief Justice of
India except when he is physically unfit to shoulder the
responsibilities. This constitutional convention, it was said,
when read in Article 124(2) would obviate any necessity
of consultation with any functionary in the judicial branch
F before making appointment of Chief Justice of India and
yet would so circumscribe the power of the President as
not to enable the executive to choose a person of its bend
and thinking. In this very context it was pointed out that
Article 126 permits the President to appoint even the
G juniormost Judge of the Supreme Court to be an acting
Chief Justice of India and it was said that such an approach
or such construction of Article 126 would be subversive of
the independence of judiciary. It was said that if the
juniormost can be appointed acting Chief J,ustice of India,
H every Judge in order to curry favour would decide in favour
MADRAS BAR ASSOCIATION v. UNION OF INDIA 207
[JAGDISH SINGH KH,EHAR, J,]
of executive. And as far as Article 124 is concerned it was A
said that if the convention of seniority is not read in Article
124(2), every Judge of the Supreme Court would be a
possible candidate for the office of Chief Justice of India
and on account of personal bias wou!d be disqualified from
being consulted. There is no warrant for such an extreme B
position and the reflection on the Judges of the Supreme
Court is equally unwarranted. On the construction as
indicated above there will be positive limitation on the
power of the President while making appointment of Chief
Justice of India and it is not necessary to read any limitation c
on the power of the President under Article 126 while
making appointment of a Judge of the Supreme Court as
acting Chief Justice of India. But the observation is
incidental to the submission and may be examined in an
appropriate case. And the question of construction is kept
0
open.
xxx xxx xxx
775. It was also stated that the expression 'obtain' in the
circular has the element of coercion and a consent ceases E
to be consent if it is obtained under coercion. It was said
that consent and coercion go ill together because forced
assent would not be consent in the eye of law. It was said
that the threat implicit in the circular becomes evident
bec~use the Chief Minister, the strong arm of the executive
F
is being asked to obtain consent. If every little thing is
looked upon with suspicion and as an attack on the
independence of judiciary, it becomes absolutely
misleading. Law Minister, if he writes directly to the Chief
Justice or the Judge concerned, propriety of the action may G
be open to question. Chandrachud, J., has warned in
Sheth case (supra) that the executive cannot and ought not
to establish rapport with Judges (SCR p. 456 CD : SCC
p. 230, para 43). Taking this direction in its letter and spirit,
the Law Minister wrote to the Chief Ministers. The Chief
Minister in turn was bound to approach the Chief Justice. H
208 SUPREME COURT REPORTS [2014] 10 S.C.R.
A This is also known to be a proper communication channel
with Judges of High Court. In this context the expression
'obtain' would only mean request the Judge to give
consent if he so desires. If he gives the consent, well and
good, and if does not give, no evil consequences are likely
B to ensue. I am not impressed by the submission of the
learned Attorney-General that one who gives consent may
have some advantage over the one who does not. I do not
see any remote advantage and if any such advantage is
given and if charge of victimisation is made out by the
c Judge not giving consent, the arm of judicial review is
strong enough to rectify the executive error.
xxx xxx xxx
815. The public interest like p'ublic policy is an unruly horse
D and is incapable of any precise definitic5n and, therefore,
it was urged that this safuguard is very vague and of
doubtful utility. It was urged that these safeguards failed to
checkmate the arbitrary exercise of power in 1976. This
approach overlooks the fact that the Lakshman Rekha
E drawn by the safeguards when transgressed or crossed,
the judicial review will set at naught the mischief. True it is
that it is almost next to impossible for individual Judge of
a High Court to knock at the doors of the Courts because
access to justice is via the insurmountable mountain of
F costs and expenses. This need not detain us because we
have seen that in time of crisis the Bar has risen to the
occasion twice over in near past though it must be
conceded that judicial review is increasingly becoming the
preserve of the high, mighty and the affluent. But the three
safeguards, namely, full and effective consultation with the
G
Chief Justice of India, and that the power to transfer can
be exercised in public interest, and judicial review, would
certainly insulate independence of judiciary against an
attempt by the executive to control it."
H Last of all, reference may be made to the observations of
MADRAS BAR ASSOCIATION v. UNION OF INDIA 209
[JAGDISH SINGH KHEHAR, J.]
E.S. Venkataramiah, J., (as he then was) who held as A
under:-
"1245. The question of policy is a matter entirely for the
President to decide. Even though the Chief Justice of India
is consulted in that behalf by the President since the policy 8
relates to the High Courts, his opinion is not binding on
the President. It is open to the President to adopt any
policy which is subject only to the judicial review by the
Court. Under Article 222 of the Constitution the Chief
Justice of India has to be consulted on the question C
whether a particular Judge should be transferred and
where he should be transferred while implementing the said
policy. If the Government requests the Chief Justice of India
to give his opinion on a transfer to implement the said
policy which is really in the public interest he cannot decline
to do so. Even though the Chief Justice was opposed to D
the 'wholesale transfers' of Judges there is no bar for the
Government treating the recommendation for transfers
made by the Chief Justice of India as a part of the
implementation of its policy. That the transfer of Shri K.8.N.
Singh was on account of the policy of the Government can E
be gathered from the following statements in the affidavits
filed before this Court: In para 8 of the affidavit dated
September 16, 1981 of Shri K.B.N. Singh it is stated:
"When the deponent wanted to know why he might be
transferred to Madras, the Hon'ble Chief Justice of India F
merely said that it was the Government policy, but gave
no clue as to what necessitated his transfer from Patna to
Madras." In para 2(g) of the affidavit of the Chief Justice
of India he has stated: "I deny that when Shri K.B.N. Singh
wanted to know over the telephone on January 5, 1981, I G
stated merely that it was the 'Government policy' .... ". In
paragraph 8 of the rejoinder-affidavit dated October 16,
1981 of Shri K.B.N. Singh, it is stated "at one point he also
said that it was Government policy to effect transfer in
batches of two or three". H
210 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 59. The sequence of judgments would now lead us to the
judgment of this Court in S.P. Sampath Kumar v. Union of India,
(1987) 1 SCC 124. The view expressed by a bench of 5
Hon'ble Judges of this Court in the above case, was in respect
of a controversy quite similar to the one in hand. In the instant
B judgment, the constitutional vires of the Administrative Tribunals
Act, 1985 was under challenge. The above Act was framed
under Article 323A of the Constitution. Article 323A was
introduced in the Constitution by the Constitution (Forty-second
Amendment) Act, 1976. The main judgment was delivered by
c Ranganath Misra, J. (as he then was) on behalf of himself and
V. Khalid, G.L. Oza and M.M. Dutt, JJ. Insofar as the concurring
view rendered by P.N. Bhagwati, CJ is concerned, the
conclusion recorded in the following paragraphs has a bearing
on the present controversy.
D "3. It is now well settled as a result of the decision of this
Court in Minerva Mills Ltd. v. Union of India. (1980) 3 SCC
625. that judicial review is a basic and essential ,feature
of the Constitution and no law passed by Parliament in
exercise of its constituent power can abrogate it or take it
E away. If the power of judicial review is abrogated or taken
away the Constitution will cease to be what it is. It is a
fundamental principle of our constitutional scheme that
every organ of the State. every authority under the
Constitution. derives its power from the Constitution and
F has to act within the limits of such power. It is a limited
government which we have under the Constitution and both
the executive and the legislature have to act within the limits
of the power conferred upon them under the Constitution.
Now a question may arise as to what are the powers of
the executive and whether the executive has acted within
G
the scope of its power. Such a question obviously cannot
be left to the executive to decide and for two verv good
reasons. First the decision of the question would depend
upon the interpretation of the Constitution and the laws and
this would pre-eminently be a matter fit to be decided by
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 211
[JAGDISH SINGH KHEHAR, J.]
the judiciarv. because it is the judiciary which alone would A
be possessed of expertise in this field and secondly. the
constitutional and legal protection afforded to the citizen
would become illusory, if it were left to the executive to
determine the legality of its own action. So also if the
legislature makes a law and a dispute arises whether in B
making the law, the legislature has acted outside the area
of its legislative competence or the law is violative of the
fundamental rights or of any other provisions of the
Constitution, its resolution cannot, for the same reasons,
be left to the determination of the legislature. The C
Constitution has, therefore created an independent
machinery for resolving these disputes and this
independent machinery is the judiciary which is vested with
the power of judicial review to determine the legality of
executive action and the validity of legislation passed by
the legislature. The judiciary is constituted the ultimate D
interpreter of the Constitution and to it is assigned the
delicate task of determining what is the extent and scope
of the power conferred on each branch of government.
what are the limits on the exercise of such power. under
the Constitution and whether any action of any branch E
transgresses such limits. It is also a basic principle of the
rule of law which permeates every provision of the
Constitution and which forms its very core and essence
that the exercise of power by the executive or any other
authority must not only be conditioned by the Constitution F
but also be in accordance with law and it is the judiciary
which has to ensure that the law is observed and there is
compliance with the requirements of law on the part of the
executive and other authorities. This function is discharged
by the judiciary by exercise of the power of judicial review G
whicli is a most potent weapon in the hands of the judiciary
for maintenance of the Rule of Law. The power of judicial
review is an integral part of our constitutional system and
without it. there will be no government of laws and the Rule
of Law would become a teasing illusion and a promise of H
212 SUPREME COURT REPORTS [2014] 10 S.C.R.
A unreality. That is why I observed in my judgment in Minerva
Mills Ltd. case (supra) at p. 287 and 288: (SCC p. 678,
para 87)
"! am of the view that if there is one feature of our
Constitution which. more than any other. is basic
8 and fundamental to the maintenance of democracy
and the rule of law. it is the power of judicial review
and it is unquestionably, to my mind. part of the
basic structure of the Constitution. Of course. when
I say this I should not be taken to suggest that
c effective alternative institutional mechanisms or
arrangements for judicial review cannot be made
by Parliament. But what I wish to emphasise is that
judicial review is a vital principle of our Constitution
and it cannot be abrogated without affecting the
D basic structure of the Constitution. If by a
constitutional amendment, the power of judicial
review is taken away and it is provided that the
validity of any law made by the legislature shall not
be liable to be called in question on any ground.
even if it is outside the legislative competence of
E
the legislature or is violative of any fundamental
rights. it would be nothing short of subversion of the
Constitution. for it would make a mockery of the
distribution of legislative powers between the Union
and the States and render the fundamental rights
F meaningless and futile. So also if a constitutional
amendment is made which has the effect of taking
away the power of judicial review and providing that
no amendment made in the Constitution shall be
liable to be questioned on any ground, even if such
G amendment is violative of the basic structure and,
therefore, outside the amendatory power of
Parliament, it would be making Parliament sole
judge of the constitutional validity of what it has
done and that would, in effect and substance, nullify
H the limitation on the amending power of Parliament
MADRAS BAR ASSOCIATION v. UNION OF INDIA 213
[JAGDISH SINGH KHEHAR, J.]
and affect the basic structure of the Constitution. A
The conclusion must therefore inevitably follow that
clause (4) of the Article 368 is unconstitutional and
void as damaging the basic structure of the
Constitution."
It is undoubtedly true that my judgment in Minerva Mills Ltd. 8
case (supra) was a minority judgment but so far as this
aspect is concerned. the majority Judges also took the
same view and held that judicial review is a basic and
essential feature of the Constitution and it cannot be
abrogated without affecting the basic structure of the C
Constitution and it is equally clear from the same decision
that though judicial review cannot be altogether abrogated
by Parliament by amending the Constitution in exercise of
its constituent power. Parliament can certainly, without in
any way violating the basic structure doctrine. set up D
effective alternative institutional mechanisms or
arrangements for judicial review. The basic and essential
feature of judicial review cannot be dispensed with but it
would be within the competence of Parliament to amend
the Constitution so as to substitute in place of the High E
Court. another alternative institutional mechanism or
arrangement for judicial review, provided it is no less
efficacious than the High Court. Then, instead of the High
Court, it would be another institutional mechanism or
authority which would be exercising the power of judicial F
review with a view to enforcing the constitutional limitations
and maintaining the rule of law. Therefore. if any
constitutional amendment made by Parliament takes away
from the High Court the power of judicial review in any
particular area and vests it in any other institutional G
mechanism or authority. it would not be violative of the
basic structure doctrine, so long as the essential condition
is fulfilled. namely. that the alternative institutional
mechanism or authority set up by the parliamentary
amendment is no less effective than the High Court.
H
214 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 4. Here, in the present case, the impugned Act has been
enacted by Parliament in exercise of the power conferred
by clause (1) of Article 323-A which was introduced in the
Constitution by Constitution (42nd Amendment) Act, 1976.
Clause (2)(d) of this article provides that a law made by
B Parliament under clause (1) may exclude the jurisdiction
of courts, except the jurisdiction of the Supreme Court
under Article 136, with respect to the disputes or
complaints referred to in clause (1). The exclusion of the
jurisdiction of the High Court under Articles 226 and 227
c by any law made by Parliament under clause (1) of Article
323-A is. therefore. specifically authorised by the
constitutional amendment enacted in clause (2)(d) of that
article. It is clear from the discussion in the preceding para
that this constitutional amendment authorising exclusion of
the jurisdiction of the High Court under Articles 226 and
D
227 postulates for its validity that the law made under
clause (1) of Article 323-A excluding the jurisdiction of the
High Court under Articles 226 and 227 must provide for
an effective alternative institutional mechanism or authority
for judicial review. If this constitutional amendment were to
E permit a law made under clause (1) of Article 323-A to
exclude the jurisdiction of the High Court under Articles
226 and 227 without setting up an effective alternative
institutional mechanism or arrangement for judicial review,
it would be violative of the basic structure doctrine and
F hence outside the constituent power of Parliament. It must,
therefore, be read as implicit in this constitutional
amendment that the law excluding the jurisdiction of the
High Court under Articles 226 and 227 permissible under
it must not leave a void but it must set up another effective
G institutional mechanism or authority and vest the power of
judicial review in it. Consequently, the impugned Act
excluding the jurisdiction of the High Court under Articles
226 and 227 in respect of service matters and vesting such
jurisdiction in the Administrative Tribunal can pass the test
H of constitutionality as being within the ambit and coverage
MADRAS BAR ASSOCIATION v. UNION OF INDIA 215
[JAGDISH SINGH KHEHAR, J.]
of clause (2)(d) of Article 323-A, only if it can be shown A
that the Administrative Tribunal set up under the impugned
Act is equally efficacious as the High Court, so far as the.
power of judicial review over service matters is concerned.
We must, therefore, address ourselves to the question
whether the Administrative Tribunal established under the B
impugned Act can be regarded as equally effective and
efficacious in exercising the power of judicial review as the
High Court acting under Articles 226 and 227 of the
Constitution."
Extracts from the judgment rendered by Ranganath Misra, C
J. (as he then was) are first of all being reproduced·
hereunder:- ·
"10. In the writ applications as presented, the main
challenge was to the abolition of the jurisdiction of this Court D
under Article 32 in respect of specified service disputes.
Challenge was also raised against the taking away of the
jurisdiction of the High Court under Articles 226 and 227.
It was further canvassed that establishment of Benches of
the Tribunal at Allahabad, Bangalore, Bombay, Calcutta,
Gauhati. Madras and Nagpur with the principal seat at E
Delhi would still prejudice the parties whose cases were
already pending before the respective High Courts
located at places other than these places and unless at
the seat of every High Court facilities for presentation of
applications and for hearing thereof were provided the F
parties and their lawyers would be adversely affected. The
interim order made on October 31, 1985, made provision
to meet the working difficulties. Learned Attorney-General
on behalf of the Central Government assured the court that
early steps would be taken to amend the law so as to save G
the jurisdiction under Article 32, remove other minor
anomalies and set up a Bench of the Tribunal at the seat
of every High Court. By the Administrative Tribunals
(Amendment) Ordinance, 1986, these ame[ldments were
brought about and by now an appropriate Act of H
216 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Parliament has replaced the Ordinance. Most of the
original grounds of attack thus do not survive and the
contentions that were canvassed at the hearing by the
counsel appearing for different parties are these:
(1) Judicial review is a fundamental aspect of the
B basic structure of our Constitution and bar of the
jurisdiction of the High Court under Articles 226 and
227 as contained in Section 28 of the Act cannot
be sustained;
(2) Even if the bar of jurisdiction is upheld. the
c Tribunal being a substitute of the High Court. its
constitution and set up should be such that it would
in fact function as such substitute and become an
institution in which the parties could repose faith
and trust;
D
(3) Benches of the Tribunal should not only be
established at the seat of every High Court but
should be available at every place where the High
Courts have permanent Benches;
E (4) So far as Tribunals set up or to be set up by the
Central or the State Governments are concerned,
they should have no jurisdiction in respect of
employees of the Supreme Court or members of
the subordinate judiciary and employees working in
F such establishments inasmuch as exercise of
jurisdiction of the Tribunal would interfere with the
control absolutely vested in the respective High
Courts in regard to the judicial and other
subordinate officers under Article 235 of the
G Constitution.
11. After oral arguments were over, learned Attorney-
General, after obtaining instructions from the Central
Government filed a memorandum to the effect that Section
2(q) of the Act would be suitably amended so as to
H exclude officers and servants in the employment of the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 217
[JAGDISH SINGH KHEHAR, J.]
Supreme Court and members and staff of the subordinate A
judiciary from the purview of the Act. In the same
memorandum it has also been saiq that Government
would arrange for sittings of the Benches of the Tribunal
at the seat or seats of each ·High· Collrt on the basis that
'sittings' will include 'circuit sittings' and the details thereof B
would be worked o.ut by the Chairman or the Vice-
Chairman concerned.
12. With these concessions made by the learned Attorney-
General, only two aspects remain to be dealt with by us,
namely, those covered by the first and the second c
contentions.
13. Strong reliance was placed on the judgment of
Bhagwati, J. (one of us - presently the learned Chief
Justice) in Minerva Mills Ltd. v. Union of India, (1980) 3 D
SCC 625, where it was said: (SCC p. 678, para 87)
"The power of judicial review is an integral part of
our constitutional system and without it. there will be
no government of laws and the rule of law would
become a teasing illusion and a promise of E
unreality. I am of the view that if there is one feature
of our Constitution which. more than any other. is
basic and fundamental to the maintenance of
democracy and the rule of law. it is the power of
judicial review and it is unquestionably, to my mind, F
part of the basic structure of the Constitution. Of
course. when I say this I should not be taken to
suggest that effective alternative institutional
mechanisms or arrangements for judicial review
cannot be made by Parliament. But what I wish to G
emphasise is that judicial review is a vital principle
of our Constitution and it cannot be abrogate_q
without affecting the basic structure of the
Constitution. If by a constitutional amendment. th?
power of judicial review is taken away and _j'_ ·'
218 SUPREME COURT REPORTS [2014] 10 S.C.R.
A provided that the validity of any law made by the
legislature shall not be liable to be called in
question on any ground, even if it is outside the
legislative competence of the legislature or is
violative of any fundamental rights. it would be
B nothing short of subversion of the Constitution. for
it would make a mockery of the distribution of
legislative powers between the Union and the
States and render the fundamental rights
meaningless and futile. So also if a constitutional
c amendment is made which has the effect of taking
away the power of judicial review ... "
14. Article 32 was described by Dr Ambedkar in course
of the debate in the Constituent Assembly as the 'soul' and
'heart' of the Constitution and it is in recognition of this
D position that though Article 323-A(2)(d) authorised
exclusion of jurisdiction under Article 32 and the original
Act had in Section 28 provided for it, by amendment
jurisdiction under Article 32 has been left untouched. The
Act thus saves jurisdiction of this Court both under Article
E 32 in respect of original proceedings as also under Article
136 for entertaining -appeals against decisions of the
Tribunal on grant of special leave. Judicial review by the
Apex Court has thus been left intact.
15. The question that arises, however, for consideration
F is whether bar of jurisdiction under Articles 226 and 227
affects the provision for judicial review. The right to move
the High Court in its writ jurisdiction - unlike the one under
Article 32 - is riot a fundamental right. Yet, the High
Courts, as the working experience of three-and-a-half
G decades shows have in exercise of the power of judicial
review played a definite and positive role in the matter of
preservation of fundamental and other rights and in
keeping administrative action under reasonable control. In
these thirty-six years following the enforcement of the
H Constitution, not only has India's population been more
MADRAS BAR ASSOCIATION v. UNION OF INDIA 219
[JAGDISH SINGH KHEHAR, J.l
than doubled but also the number of litigations before the A
courts including the High Courts has greatlyjncreased. As
the pendency in the High Courts increased and soon
became the pressing problem of backlog, the nation's
attention came to be bestowed on this aspect. Ways and
means to relieve the High Courts of the' load began to B
engage the attention of the government at the Centre as
also in the various States. As early as 1969, a Committee
was set up by the Central Government under the
chairmanship of Mr Justice Shah of this Court to make
recommendations suggesting ways and means for c
effective, expeditious and satisfactory disposal of matters
relating to service disputes of government servants as it
was found that a sizeable portion of pending litigations
related to this category. The Committee recommended the
setting up of an independent Tribunal to handle the
D
pending cases before this Cour~ ai1d the High Courts.
While this report was still engaging the attention of
government, the Administrative Reforms Commission also
took note of the situation and recommended the setting up
of Civil Services Tribunals to deal with appeals of
Government servants against disciplinary action. In certain E
States, Tribunals of this type came into existence and
started functioning. But the Central Government looked into
the matter further as it transpired that the major chunk of
service litigations related to matters other than disciplinary
action. In May 1976,, a Conference of Chief Secretaries F
of the States discussed this problem. Then came the Forty-
second Amendment of the Constitution bringing in Article
323-A which authorized Parliament to provide by law "for
the adjudication or trial by Administrative Tribunals of
disputes and complaints with respect to recruitment and G
conditions of service of persons appointed to public
services and posts in connection with the affairs of the
Union or of any State or of any local or other authority within
the territory of India or under the control of the Government
of India or of any Corporation owned or controlled by the H
220 SUPREME COURT REPORTS [2014] 10 S.C.R.
A government". As~ already stated this article envisaged
exclusion of the jurisdiction of ' all courts, except the
jurisdiction of the Supreme Court under Article 136, with
respect to the disputes or complaints referred to in clause
(1 ). Though the Constitution now contamed the enabling
B power, no immediate steps were ·taken to set up any
Tribunal as contemplated by Article 323-A. A Constitution
Bench of this Court in K.K. Dutta v. Union of India, (1980)
4 SCC 38, observed: [SCC p. 39, para 1 : SCC (L & S)
p. 486]
c ''There are few other litigative areas than disputes
between members of various services inter se,
where the principle that public policy requires that
all litigation must have an end can apply with greater
force. Public servants ought not to be driven or
D required to dissipate their time and energy in
courtroom battles. Thereby their attention is
diverted from public to private affairs and their inter
se disputes affect their sense of oneness without
which no institution can function effectively. The
E constitution of Service Tribunals by State
Governments with an apex Tribunal at the Centre,
which, in the generality of cases, should be the final
arbiter of controversies relating to conditions of
service, including the vexed question of seniority,
F may save the courts from the avalanche of writ
petitions and appeals in service matters. The
proceedings of such Tribunals can have the merit
of informality and if they will not be tied down to strict
rules of evidence, they might be able to produce
solutions which will satisfy many ... "
G
In the meantime the problem of the backlog of cases in
the High Courts became more acute and pressing and
came to be further discussecj in Parliament and in
conferences and seminars. Ultimately in January 1985,
H both Houses of Parliament passed the Bill and with the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 221
[JAGDISH SINGH KHEHAR, J.]
Presidential assent on February 27, 1985, the law · A
enabling the long awaited Trib_µnal to be constituted came
into existence. As already noticed, the Central Government
notified the Act to come into force with effect from
November 1, 1985.
B
16. Exclusion of the jurisdiction of the High Courts in
service matters and its propriety as also validity have thus
to be examined in the background indicated above. We
have already seen that judicial review by this Court is left
wholly unaffected and thus there is a forum where matters C
of importance and grave injustice can be brought for
determination or rectification. Thus exclusion of the
jurisdiction of the High Court does not totally bar judicial
review. This Court in Minerva Mills' case (supra) did point
out that "effective alternative institutional mechanisms or
arrangements for judicial review" can be made by D
Parliament. Thus it is possible to set up an alternative
institution in place of the High Court for providing judicial
review. The debates and deliberations spread over almost
two decades for exploring ways and means for relieving
the High Courts of the load of backlog of cases and for E
assuring quick settlement of service disputes in the interest
of the public servants as also the country cannot be lost
sight of while considering this aspect. It has not been
disputed before us - and ti>erhaps could not have been -
that the Tribunal under the scheme of the Act would take F
over a part of the existing backlog and a share of the
normal load of the High Courts. The Tribunal has been
contemplated as a substitute and not as supplemental to
the High Court in the scheme of administration of justice.
To provide the Tribunal as an additional forum from where G
parties could go to the High Court would certainly have
been a retrograde step considering the situation and
circumstances to meet which the innovation has been
brought about. Thus barring of the jurisdiction of the High
Court can indeed not be a valid ground of attack. H
222 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 17. What. however. has to be kept in view is that the
Tribunal should be a real substitute of the High Court - not
only in form and de jure but in content and de facto. As
was pointed out in Minerva's Mills case (supra). the
alternative arrangement has to be effective and efficient
B as also capable of upholding the constitutional limitations.
Article 16 of the Constitution guarantees equality of
opportunity in matters of public employment.
Article 15 bars discrimination on grounds of religion, race,
caste, sex or place of birth. The touch-stone of equality
c enshrined in Article 14 is the greatest of guarantees for the
citizen. Centering around these articles in the Constitution
a service jurisprudence has already grown in this country.
Under Sections 14 and 15 of the Act all the powers of the
Courts except those of this Court in regard to matters
specified therein vest in the Tribunal-- either Central or
D
State. Thus the Tribunal is the substitute of the High Court
and is entitled to exercise the powers thereof.
18. The High Courts have been functioning over a century
and a quarter and until the Federal Court was established
E under the Government of India Act, 1935, used to be the
highest courts within their respective jurisdictions subject
to an appeal to the Privy Council in a limited category of
cases. In this long period of about six scores of years, the
High Courts have played their role effectively, efficiently as
F · also satisfactorily. The litigant in this country has seasoned
himself to look upto the High Court as the unfailing
protector of his person. property and honour. The institution
has served its purpose very well and the common man has
thus come to repose great confidence therein. Disciplined.
G independent and trained Judges well versed in law and
working with all openness in an unattached and objective
manner have ensured dispensation of justice over the
years. Aggrieved people approach the Court - the social
mechanism to act as the arbiter - not under legal obligation
H -but under the belief and faith that justice shall be done to
MADRAS BAR ASSOCIATION v. UNION OF INDIA 223
[JAGDISH SINGH KHEHAR, J.]
them and the State's authorities would implement the A
decision of the Court. It is. therefore. of paramount
importance that the substitute institution - the Tribunal -
must be a worthy successor of the High Court in all
respects. That is exactly what this Court intended to convey
when it spoke of an alternative mechanism in Minerva B
Mills' case (supra)."
60. Reference may also be made to the decision rendered
by this Court in L. Chandra Kumar v. Union of India, (1997) 3
sec 261. The instant decision was rendered by a constitution
bench of 7 Judges. The question which arose for determination C
in the instant judgment was, whether the power conferred upon
the Parliament and the State legislatures vide Articles
323A(2)(d) and 3238(3)(d) totally excluding the jurisdiction of
"all courts" except the Supreme Court, under Article 136 of the
Constitution, violated the "basic structure" of the Constitution. D
In other words, the question was, whether annulling/retracting
the power of "judicial review" conferred on High Courts (under
Articles 226 and 227 of the Constitution) and on the Supreme
Court (under Articles 32 of the Constitution), was violative of
the "basic structure" of the Constitution. Furthermore, whether E
the tribunals constituted under Articles 323A and 3238 of the
Constitution, possess the competence to test the constitutional
validity of statutory provisions/rules? And also, whether Tribunals
constituted under Articles 323A and 3238 of the Constitution
could be said to be effective substitutes of the jurisdiction vested F
in the High Courts? And if not, what changes were required?
The above controversy came to be referred to the constitution
bench in furtherance of an order passed in L. Chandra Kumar
v. Union of India, (1995) 1 sec 400, on account of the
decisions rendered in post S.P. Sampath Kumar cases (supra), G
namely, J.B. Chopra v. Union of India, (1987) 1 SCC 422, M.B.
Majumdar v. Union of India, (1990) 4 SCC 501, Amulya
Chandra Kalita v. Union of India, (1991) 1 SCC 181, R.K. Jain
v. Union of India, (1993) 4 SCC 119, and Dr. Mahabal Ram v.
Indian Council of Agricultural Research, (1994) 2 SCC 410. On
H
224 SUPREME COURT REPORTS [2014] 10 S.C.R.
A the issues which are relevant to the present controversy, this
Court observed as under:-
"76. To express our opinion on the issue whether the power
of judicial review vested in the High Courts and in the
Supreme Court under Articles 226/227 and 32 is part of
B the basic structure of the Constitution, we must first attempt
to understand what constitutes the basic structure of the
Constitution. The doctrine of basic structure was evolved
in Kesavananda Bharati case,(1973) 4 SCC 225.
However, as already mentioned, that case did not lay down
c that the specific and particular features mentioned in that
judgment alone would constitute the basic structure of our
Constitution. Indeed, in the judgments of Shelat and Grover,
JJ., Hegde and Mukherjea, JJ. and Jaganmohan Reddy,
J., there are specific observations to the effect that their
D list of essential features comprising the basic structure of
the Constitution are illustrative and are not intended to be
exhaustive. In Indira Gandhi case, 1975 Supp. SCC 1,
Chandrachud, J. held that the proper approach fora Judge
who is confronted with the question whether a particular
E facet of the Constitution is part of the basic structure, is to
examine, in each individual case, the place of the particular
feature in the scheme of our Constitution, its object and
purpose, and the consequences of its denial on the
integrity of our Constitution as a fundamental instrument for
F the governance of the country. (supra at pp. 751-752). This
approach was specifically adopted by Bhagwati, J. in
Minerva Mills case, (1980) 3 SCC 625, (at pp. 671-672)
and is not regarded as the definitive test in this field of
Constitutional Law.
G 77. We find that the various factors mentioned in the test
evolved by Chandrachud, J. have already been considered
by decisions of various Benches of this Court that have
been referred to in the course of our analysis. From their
conclusions. many of which have been extracted by us in
H toto. it appears that this Court has always considered the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 225
[JAGDISH SINGH KHEHAR, J.]
power of judicial review vested in the High Courts and in A
this Court under Articles 226 and 32 respectively. enabling
legislative action to be subjected to the scrutiny of superior
courts. to be integral to our constitutional scheme. While
several judgments have made specific references to this
aspect [Gajendragadkar, C.J. in Keshav Singh case, AIR 8
1965 SC 745, Beg, J. and Khanna, J. in Kesavananda
Bharati case (supra), Chandrachud, C.J. and Bhagwati, J.
in Minerva Mills (supra), Chandrachud, C.J. in Fertilizer
Kamgar, (1981) 1 SCC 568, K.N. Singh, J. in Delhi
Judicial Service Assn., (1991) 4 SCC 406] the rest have C
made general observations highlighting the significance of
this feature.
78. The legitimacy of the power of courts within
constitutional democracies to review legislative action has
been questioned since the time it was first conceived. The D
Constitution of India, being alive to such criticism. has.
while conferring such power upon the higher judiciarv,
incorporated important safeguards. An analysis of the
manner in which the Framers of our Constitution
incorporated provisions relating to the judiciary would E
indicate that they were very greatly concerned with securing
the independence of the judiciary. These attempts were
directed at ensuring that the judiciary would be capable of
effectively discharging its wide powers of-judicial review.
While the Constitution confers the power to strike down
F
laws upon the High Courts and the Supreme Court. it also
contains elaborate provisions dealing with the tenure.
salaries. allowances. retirement age of Judges as well as
the mechanism for selecting Judges to the superior courts.
The inclusion of such elaborate provisions appears to have G
been occasioned by the belief that. armed by such
provisions, the superior courts would be insulated from any
executive or legislative attempts to interfere with the
making of their decisions. The Judges of the superior
courts have been entrusted with the task of upholding the
Constitution and to this end, have been conferred the H
226 SUPREME COURT REPORTS [2014] 10 S.C.R.
A power to interpret it. It is they who have to ensure that the
balance of power envisaged by the Constitution is
maintained and that the legislature and the executive do
not, in the discharge of their functions, transgress
constitutional limitations. It is equally their duty to oversee
B that the judicial decisions rendered by those who man the
subordinate courts and tribunals do not fall foul of strict
standards of legal correctness and judicial independence.
The constitutional safeguards which ensure the
independence of the Judges of the superior judiciary, are
c not available to the Judges of the subordinate judiciary or
to those who man tribunals created by ordinary
legislations. Consequently, Judges of the latter category
can never be considered full and effective substitutes for
the superior judiciary in discharging the function of
constitutional interpretation. We, therefore, hold that the
D
power of judicial review over legislative action vested in
the High Courts under Article 226 and in this Court under
Article 32 of the Constitution is an integral and essential
feature of the Constitution, constituting part of its basic
structure. Ordinarily. therefore. the power of High Courts
E and the Supreme Court to test the constitutional validity of
legislations can never be ousted or excluded.
79. We also hold that the power vested in the High Courts
to exercise judicial superintendence over the decisions of
all courts and tribunals within their respective jurisdictions
F
is also part of the basic structure of the Constitution. This
is because a situaticn where the High Courts are divested
of all other judicial functions apart from that of
constitutional interpretation, is equally to be avoided.
G xxx xxx xxx
96. It has been brought to our notice that one reason why
these Tribunals have been functioning inefficiently is
because there is no authority charged with supervising and
fulfilling their administrative requirements. To this end, it is
H suggested that the Tribunals be made subject to the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 227
[JAGDISH SINGH KHEHAR, J.]
supervisory jurisdiction of the High Courts within whose A
territorial jurisdiction they fall. We are, however, of the view
that this may not be the best way of solving the problem.
We do not think that our constitutional scheme requires that
all adjudicatory bodies which fall within the territorial
jurisdiction of the High Courts should be subject to their B
supervisory jurisdiction. If the idea is to divest the High
Courts of their onerous burdens, then adding to their
supervisory functions cannot, in any manner, be of
assistance to them. The situation at present is that different
Tribunals constituted under different enactments are c
administered by different administrative departments of
the Central and the State Governments. The problem is
compounded by the fact that some Tribunals have been
created pursuant to Central Legislations and some others
have been created by State Legislations. However. even
0
in the case of Tribunals created by parliamentary
legislations. there is no uniformity in administration. We are
of the view that. until a wholly independent agency for the
administration of all such Tribunals can be set up, it is
desirable that all such Tribunals should be. as far as
possible. under a single nodal ministry which will be in a E
position to oversee the working of these Tribunals. For a
number of reasons that Ministry should appropriately be
the Ministry of Law. It would be open for the Ministry, in its
turn, to appoint an independent supervisory body to
oversee the working of the Tribunals. This will ensure that F
if the President or Chairperson of the Tribunal is for some
reason unable to take sufficient interest in the working of
the Tribunal, the entire system will not languish and the
ultimate consumer of justice will not suffer. The creation of
a single umbrella organisation will. in our view. remove G
many of the ills of the present system. If the need arises,
there can be separate umbrella organisations at the
Central and the State levels. Such a supervisory authority
must try to ensure that the independence of the members
of all such Tribunals is maintained. To that extent. the H
228 SUPREME COURT REPORTS [2014] 10 S.C.R.
A procedure for the selection of the members of the
Tribunals. the manner in which funds are allocated for the
functioning of the Tribunals and all other consequential
details will have to be clearly spelt out.
97. The suggestions that we have made in respect of
B appointments to Tribunals and the supervision of their
administrative function need to be considered in detail by
those entrusted with the duty of formulating the policy in this
respect. That body will also have to take into consideration
the comments of expert bodies like the LCI and the
c Malimath Committee in this regard. We. therefore.
recommend that the Union of India initiate action in this
behalf and after consulting all concerned. place all these
Tribunals under one single nodal department. preferably
the Legal Department.
D 98. Since we have analysed the issue of the constitutional
validity of Section 5(6) of the Act at length, we may now
pronounce our opinion on this aspect. Though the vires of
the provision was not in question in Dr Mahabal Ram
case, (1994) 2 sec 401, we believe that the approach
E adopted in that case, the relevant portion of which has
been extracted in the first part of this judgment, is correct
since it harmoniously resolves the manner in which
Sections 5(2) and 5(6) can operate together. We wish to
make it clear that where a question involving the
F interpretation of a statutory provision or rule in relation to
the Constitution arises for the consideration of a Single
Member Bench of the Administrative Tribunal. the proviso
to Section 5(6) will automatically apply and the Chairman
or the Member concerned shall refer the matter to a Bench
G consisting of at least two Members. one of whom must be
a Judicial Member. This will ensure that questions involving
the vires of a statutory provision or rule will never arise for
adjudication before a Single Member Bench or a Bench
which does not consist of a Judicial Member. So
H construed, Section 5(6) will no longer be susceptible to
MADRAS BAR ASSOCIATION v. UNION OF INDIA 229
[JAGDISH SINGH KHEHAR, J.]
charges of unconstitutionality. A
99. In view of the reasoning adopted by us. we hold that
clause 2(d} of Article 323-A and clause 3(d} of Article 323-
B, to the extent they exclude the jurisdiction of the High
Courts and the Supreme Court under Articles 226/227 and B
32 of the Constitution. are unconstitutional. Section,28 of
the Act and the "exclusion of jurisdiction" clauses in all other
legislations enacted under the aegis of Articles 323-A and
323-B would. to the same extent. be unconstitutional. The
jurisdiction conferred upon the High Courts under Articles C
226/227 and upon the Supreme Court under Article 32 of
the Constitution is a part of the inviolable basic structure
of our Constitution. While this jurisdiction cannot be ousted,
other courts and Tribunals may perform a supplemental role
in discharging the powers conferred by Articles 226/227
and 32 of the Constitution. The Tribunals created under D
Article 323-A and Article 323-B of the Constitution are
possessed of the competence to test the constitutional
validity of statutory provisions and rules. All decisions of
these Tribunals will. however. be subject to scrutiny before
a Division Bench of the High Court within whose jurisdiction E
the Tribunal concerned falls. The Tribunals will.
nevertheless. continue to act like courts of first instance in
respect of the areas of law for which they have been
constituted. It will not. therefore. be open for litigants to
directly approach the High Courts even in cases where they F
question the vires of statutory legislations (except where
the legislation which creates the particular Tribunal is
challenged) by overlooking the jurisdiction of the Tribunal
concerned. Section 5(6) of the Act is valid and
constitutional and is to be interpreted in the manner we G
have indicated."
61. Reference was then made to Union of India v. Madras
Bar Association, (2010) 11 SCC 1. The instant decision was
rendered by a constitution bench of 5 Judges. The controversy
adjudicated upon in this case related to a challenge to the H
230 SUPREME COURT REPORTS [2014] 10 S.C.R.
A constitutional validity of Parts 1B and 1C of the Companies Act,
1956. These parts were inserted into the Companies Act, by
the Companies (Second Amendment) Act, 2002. Thereby,
provision was made for the constitution of the National
Company Law Tribunal and the National Company Law
s Appellate Tribunal. The relevant questions raised in the present
controversy, are being noticed. Firstly, whether Parliament does
not have the jurisdiction/legislative competence, to vest intrinsic
judicial functions, that have been traditionally performed by High
Courts, in any tribunal outside the judiciary? Secondly, whether
c transferring of the entire company law jurisdiction, hitherto
before vested in High Courts, to the National Company Law
Tribunal, which was not under the control of the judiciary, was
violative of the principles of "separation of powers" and
"independence of judiciary"? Thirdly, whether Sections 10-FB,
D 10-FD, 10-FE, 10-FF, 10-FL(2), 10-FO, 10-FR(3), 10-FT, 10-
FX contained in Parts 1-8 and 1-C of the Companies Act, by
virtue of the above amendment, were unconstitutional being in
breach of the principles of the "rule of law", "separation of
powers" and "independence of judiciary"? The relevant narration
E and conclusions recorded by this Court are being reproduced
hereunder:-
"Section 1O-FD(3)(0: Appointment of Technical Member to
NCLT
16. The High Court has held that appointment of a
F member under the category specified in Section 1O-
FD(3)(f), can have a role only in matters concerning revival
and rehabilitation of sick industrial companies and not in
relation to other matters. The High Court has therefore
virtually indicated that NCLT should have two divisions, that
G is an Adjudication Division and a Rehabilitation Division
and persons selected under the category specified in
clause (f) should only be appointed as Members of the
Rehabilitation Division.
17. The Union Government contends that similar provision
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 231
[JAGDISH SINGH KHEHAR, J.]
exists in Section 4(3) of the Sick Industrial Companies A
(Special Provisions) Act, 1985; that the provision is only
an enabling one so that the best talent can be selected by
the Selection Committee headed by the Chief Justice.of
India or his nominee; and that it may not be advisable to
have division or limit or place restrictions on the power of B
the President of the Tribunal to constitute appropriate
benches. It is also pointed out that a technical member
would always sit in a Bench with a judicial member.
Section 1O-FD(3)(g): Qualification for appointment of
Technical Member C
18. The High Court has observed that in regard to the
Presiding Officers of the Labour Courts and the Industrial
Tribunals or the National Industrial Tribunal, a minimum
period of three to five years' experience should be
0
prescribed, as what is sought to be utilised is their expert
knowledge in labour laws.
19. The Union Government submits that it may be
advisable to leave the choice of selection of the most
appropriate candidate to the Committee headed by the E
Chief Justice of India or his nominee.
20. The High Court has also observed that as persons
who satisfy the qualifications prescribed in Section 10-
FD(3)(g) would be persons who fall under Section 10-
FD(2)(a), it would be more appropriate to include this F
qualification in Section 10-FD(2)(a). It has also observed
in Section 10-FL dealing with "Benches of the Tribunal", a
provision should be made that a "judicial member" with this
qualification shall be a member of the Special Bench
referred to in Section 1O-FL(2) for cases relating to G
rehabilitation, restructuring or winding up of companies.
21. The Union Government has not accepted these
findings and contends that the observations of the High
Court would amount to judicial legislation.
H
232 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Section 1O-FD(3)(h): Qualification of Technical Member of
NCLT
22. The High Court has observed that clause (h) referring
to the category of persons having special knowledge of
and experience in matters relating to labour, for not less
B
than 15 years is vague and should be suitably amended
so as to spell out with certainty the qualification which a
person to be appointed under clause (h) should possess.
23. The Union Government contends that in view of the wide
c and varied experience possible in labour matters, it may
not be advisable to set out the nature of experience or
impose any restrictions in regard to the nature of
experience. It is submitted that the Selection Committee
headed by the Chief Justice of India or his nominee would
D consider each application on its own merits.
24. The second observation of the High Court is that the
member selected under the category mentioned in clause
(h) must confine his participation only to the Benches
dealing with revival and rehabilitation of sick companies
E
and should also be excluded from functioning as a single-
Member Bench for any matter.
25. The Union Government contends that it may not be
advisable to fetter the prerogative of the President of the
F Tribunal to constitute benches by making use of available
members. It is also pointed out that it may not be proper
to presume that a person well versed in labour matters will
be unsuitable to be associated with a judicial member in
regard to adjudication of winding-up matters.
G
xxx xxx xxx
Section 10-FX: Selection process for President/
Chairperson
H 31. The High Court has expressed the view that the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 233
[JAGDISH SINGH KHEHAR, J.]
selection of the President/Chairperson should be by a A
Committee headed by the Chief Justice of India in
consultation with two senior Judges of the Supreme Court.
32. The Union Government has submitted that it would not
be advisable to make such a provision in regard to B
appointment of the President/Chairperson of statutory
tribunals. It is pointed out that no other legislation
constituting tribunals has such a provision."
In order to assail the challenge to the provisions extracted
hereinabove, the Union of India asserted, that the Madras High C
Court (the judgment whereof was, also under challenge) having
held that the Parliament had the competence and the power to
establish the National Company Law Tribunal and the National
Company Law Appellate Tribunal, ought to have dismissed the
writ petition. The assertion at the hands of the Union of India D
was, that some of the directions contained in the judgment
rendered by the Madras High Court, reframed and recast Parts
1B and 1C introduced by the Amendment Act and amounted
to converting "judicial review" into judicial legislation. It was,
however noticed, that the Union of India having agreed to rectify E
several of the defects pointed out by the High Court, the appeal
of the Union of India was restricted to the findings of the High
Court relating to Sections 1O-FD(3)(f), (g), (h) and 10-FX. To
understand the tenor of the issue which was the subject matter
before this Court, it is relevant to extract some of the provisions F
of the Companies Act, 1956 as amended by the Companies
(Second Amendment) Act, 2002, relating to the constitution of
the National Company Law Tribunal and the National Company
Law Appellate Tribunal). The same are reproduced hereunder:-
"PART 1-B G
NATIONAL COMPANY LAW TRIBUNAL
10-FB. Constitution of National Company Law
Tribunal.-The Central Government shall, by notification H
234 SUPREME COURT REPORTS [2014] 10 S.C.R.
A in the Official Gazette, constitute a Tribunal to be known
as the National Company Law Tribunal to exercise and
discharge such powers and functions as are, or may be,
conferred on it by or under this Act or any other law for the
time being in force.
B
10-FC. Composition of Tribunal.-The Tribunal shall
consist of a President and such number of judicial and
technical members not exceeding sixty-two, as the Central
Government deems fit, to be appointed by that
Government, by notification in the Official Gazette.
c
10-FD. Qualifications for
appointment of President and Members .....-(1) The Central
Government shall appoint a person who has been, or is
qualified to be, a Judge of a High Court as the President
D of the Tribunal.
(2) A person shall not be qualified for appointment as
judicial member unless he-
(a) has, for at least fifteen years, held a judicial
E office in the territory of India; or
(b) has, for at least ten years been an advocate of
a High Court, or has partly held judicial office and
has been i:iartly in practice as an advocate for a total
F period of fifteen years; or
(c) has held for at least fifteen years a Group A post
or an equivalent post under the Central Government
or a State Government including at least three
years of service as a Member of the Indian
G Company Law Service (Legal Branch) in Senior
Administrative Grade in that service; or
(d) has held for at least fifteen years a Group A post
or an equivalent post under the Central Government
H (including at least three years of service as a
MADRAS BAR ASSOCIATION v. UNION OF INDIA 235
[JAGDISH SINGH KHEHAR, J.]
Member of the Indian Legal Service in Grade I of A
that service).
(3) A person shall not be qualified for appointment as
technical member unless he-
(a) has held for at least fifteen years a Group A post or an B
equivalent post under the Central Government or a State
Government [including at least three years of service as a
Member of the Indian Company Law Service (Accounts
Branch) in Senior Administrative Grade in that service]; or
c
(b) is, or has been, a Joint Secretary to the Government
of India under the Central Staffing Scheme, or held any
other post under the Central Government or a State
Government carrying a scale of pay which is not less than
that of a Joint Secretary to the Government of India, for at 0
least five years and has adequate knowledge of, and
experience in, dealing with problems relating to company
law; or
{c) is, or has been, for at least fifteen years in practice as
a chartered accountant under the Chartered Accountants E
Act, 1949 (38 of 1949); or
(d) is, or has been, for at least fifteen years in practice as
a cost accountant under the Cost and Works Accountants
Act, 1959 (23 of 1959); or F
{e) is, or has been, for at least fifteen years working
experience as a Secretary in wholetime practice as
defined in clause (45-A) of Section 2 of this Act and is a
member of the Institute of the Company Secretaries of India G
constituted under the Company Secretaries Act, 1980 (56
of 1980); or
(f) is a person of ability, integrity and standing having
special knowledge of, and professional experience of not
less than twenty years in science, technology, economics, H
236 SUPREME COURT REPORTS [2014] 10 S.C.R.
A banking, industry, law, matters relating to ind1Jstrial finance,
industrial management, industrial reconstruction,
administration, investment, accountancy, marketing or any
other matter, the special knowledge of, or professional
experience in, which would be in the opinion of the Central
B Government useful to the Tribunal; or
(g) is, or has been, a Presiding Officer of a Labour Court,
Tribunal or National Tribunal constituted under the Industrial
Disputes Act, 1947 (14 of 1947); or
(h) is a person having special knowledge of, and
c experience of not less than fifteen years in, the matters
relating to labour.
Exp/anation.-For the purposes of this Part,-
(i) 'judicial member' means a Member of the
D Tribunal appointed as such under sub-section (2)
of Section 10-FD and includes the President of the
Tribunal;
(ii) 'technical member' means a Member of the
Tribunal appointed as such under sub-section (3)
E
of Section 10-FD.
10-FE. Term of office of President and Members.-The
President and every other Member of the Tribunal shall hold
office as such for a term of three years from the date on
F which he enters upon his office, but shall be eligible for
reappointment:
Provided that no President or other Member shall
hold office as such after he has attained,-
(a) in the case of the President, the age of sixty-
G
seven years;
(b) in the case of any other Member, the age of
sixty-five years:
H
Provided further that the President or other Member
MADRAS BAR ASSOCIATION v. UNION OF INDIA 237
[JAGDISH SINGH KHEHAR, J.]
may retain his lien with his parent cadre or Ministry or A
Department, as the case may be, while holding office as
such.
10-FF. Financial and administrative powers of Member
Administration.-The Central Government shall designate B
any judicial member or technical member as Member
(Administration) who shall exercise such financial and
administrative powers as may be vested in him under the
rules which may be made by the Central Government:
Provided that the Member (Administration) shall C
have authority to delegate such of his financial and
administrative powers as he may think fit to any other
officer of the Tribunal subject to the condition that such
officer shall, while exercising such delegated powers
continue to act under the direction, superintendence and D
control of the Member (Administration).
* * *
10-FK. Officers and employees of Tribunal.-(1) The
Central Government shall provide the Tribunal with such E
officers and other employees as it may deem fit.
(2) The officers and other employees of the Tribunal shall
discharge their functions under the general
superintendence of the Member Administration. F
(3) The salaries and allowances and other terms and
conditions of service of the officers and other employees
of the Tribunal shall be such as may be prescribed.
10-FL. Benches of Tribunal.-(1) Subject to the provisions G
of this section, the powers of the Tribunal may be
exercised by Benches, constituted by the President of the
Tribunal, out of which one shall be a judicial member and
another shall be a technical member referred to in claus~s
(a) to (f) of sub-section (3) of Section 10-FD: H
238 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Provided that it shall be competent for the Members
authorised in this behalf to function as a Bench consisting
of a single Member and exercise the jurisdiction, powers
and authority of the Tribunal in respect of such class of
cases or such matters pertaining to such class of cases,
B as the President of the Tribunal may, by general or special
order, specify:
Provided further that if at any stage of the hearing of
any such case or matter, it appears to the Member of the
Tribunal that the case or matter is of such a nature that it
c ought to be heard by a Bench consisting of two Members,
the case or matter may be transferred by the President of
the Tribunal or, as the case may be, referred to him for
transfer to such Bench as the President may deem fit.
(2) The President of the Tribunal shall, for the disposal of
D
any case relating to rehabilitation, restructuring or winding
up of the companies, constitute one or more special
Benches consisting of three or more Members, each of
whom shall necessarily be a judicial member, a technical
member appointed under any of the clauses (a) to (f) of
E'
sub-section (3) of Section 10-FD, and a Member
appointed under clause (g) or clause (h) of sub-section (3)
of Section 10-FD:
Provided that in case a Special Bench passes an
F order in respect of a company to be wound up, the winding-
up proceedings of such company may be conducted by a
Bench consisting of a single Member.
. (3) If the Members of a Bench differ in opinion on any point
or points, it shall be decided according to the majority, if
G there is a majority, but if the Members are equally divided,
they shall state the point or points on which they differ, and
the case shall be referred by the President of the Tribunal
for hearing on such point or points by one or more of the
other Members of the Tribunal and such point or points shall
H be decided according to the opinion of the majority of
MADRAS BAR ASSOCIATION v. UNION OF INDIA 239
[JAGDISH SINGH KHEHAR, J.]
Members of the Tribunal who have heard the case, A
including those who first heard it.
(4) There shall be constituted such number of Benches as
may be notified by the Central Government.
(5) In addition to the other Benches, there shall be a B
Principal Bench at New Delhi presided over by the
President of the Tribunal.
(6) The Principal Bench of the Tribunal shall have powers
of transfer of proceedings from any Bench to another
Bench of the Tribunal in the event of inability of any Bench C
from hearing any such proceedings for any reason:
Provided that no transfer of any proceedings shall be made
under this sub-section except after recording the reasons
for so doing in writing. D
* * *
10-FO. Delegation of powers.-The Tribunal may, by
general or special order, delegate, subject to such
conditions and limitations, if any, as may be specified in E
the order, to any Member or officer or other employee of
the Tribunal or other person authorized by the Tribunal to
manage any industrial company or industrial undertaking
or any operating agency, such powers and duties under
this Act as it may deem necessary. F
PART 1-C
APPELLATE TRIBUNAL
* * *
10-FR. Constitution of Appellate Tribunal.-(1) The G
Central Government shall, by notification in the Official
Gazette, constitute with effect from such date as may be
specified therein, an Appellate Tribunal to be called the
'National Company Law Appellate Tribunal' consisting of
a Chairperson and not more than two Members, to be · H
240 SUPREME COURT REPORTS [2014] 10 S.C.R.
A appointed by that Government, for hearing appeals against
the orders of the Tribunal under this Act.
(2) The Chairperson of the Appellate Tribunal shall be a
person who has been a Judge of the Supreme Court or
the Chief Justice of a High Court.
B
(3) A Member of the Appellate Tribunal shall be a person
of ability, integrity and standing having special knowledge
of, and professional experience of not less than twenty-five
years in, science, technology, economics, banking,
c industry, law, matters relating to labour, industrial finance,
industrial management, industrial reconstruction,
administration, investment, accountancy, marketing or any
other matter, the special knowledge of, or professional
experience in which, would be in the opinion of the Central
Government useful to the Appellate Tribunal.
D
* * *
10-FT. Term of office of Chairperson and Members.-
The Chairperson or a Member of the Appellate Tribunal
shall hold office as such for a term of three years from the
E
date on which he enters upon his office, but shall be eligible
for reappointment for another term of three years:
Provided that no Chairperson or other Member shall hold
office as such after he has attained,-
F (a) in the case of the Chairperson, the age of seventy
years;
(b) in the case of any other Member, the age of sixty-seven
years.
G * * *
10-FX. Selection Committee.-(1) The Chairperson and
Members of the Appellate Tribunal and President and
Members of the Tribunal shall be appointed by the Central
Government on the recommendations of a Selection
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 241
[JAGDISH SINGH KHEHAR, J.]
Committee consisting of- A
(a) Chief Justice of India or his nominee
Chairperson;
(b) Secretary in the Ministry of Finance and
Company Affairs Member; B
(c) Secretary in the Ministry of Labour Member;
(cf) Secretary in the Ministry of Law and Justice
(Department of Legal Affairs or Legislative c
Department) Member;
(e) Secretary in the Ministry of Finance and
Company Affairs (Department of Company Affairs)
Member.
D
(2) The Joint Secretary in the Ministry or Department of the
Central Government dealing with this Act shall be the
Convenor of the Selection Committee.
* * *
E
(5) Before recommending any person for appointment as
the Chairperson and Members of the Appellate Tribunal
and President and Members of the Tribunal, the Selection
Committee shall satisfy itself that such person does not
have financial or other interest which is likely to affect F
prejudicially his functions as such Chairperson or Member
of the Appellate Tribunal or President or Member of the
Tribunal, as the case may be.
(6) No appointment of the Chairperson and Members of G
the Appellate Tribunal and President and Members of the
Tribunal shall be invalidated merely by reason of any
vacancy or any defect in the constitution of the Selection
Committee.
* * * H
242 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 10-G. Power to punish for contempt.-The Appel late
Tribunal shall have the same jurisdiction, powers and
authority in respect of contempt of itself as the High Court
has and may exercise, for this purpose under the
provisions of the Contempt of Courts Act, 1971 (70 of
B 1971 ), which shall have the effect subject to modifications
that-
(a) the reference therein to a High Court shall be construed
as including a reference to the Appellate Tribunal;
C (b) the reference to Advocate General in Section 15 of the
said Act shall be construed as a reference to such law
officers as the Central Government may specify in this
behalf.
D * * *
10-GB. Civil court not to have jurisdiction.-(1) No civil
court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which the Tribunal or
the Appellate Tribunal is empowered to determine by or
E under this Act or any other law for the time being in force
and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in
pursuance of any power conferred by or under this Act or
any other law for the time being in force.
F
* * *
10-GF. Appeal to Supreme Court.-Any person
aggrieved by any decision or order of the Appellate
Tribunal may file an appeal to the Supreme Court within
G sixty days from the date of communication of the decision
or order of the Appellate Tribunal to him on any question
of law arising out of such decision or order:
Provided that the Supreme Court may, if it is satisfied that
H the appellant was prevented by sufficient cause from filing
MADRAS BAR ASSOCIATION v. UNION OF INDIA 243
[JAGDISH SINGH KHEHAR, J.]
the appeal within the said period, .allow it to be filed within A
a further period not exceeding sixty days."
Having noticed the relevant statutory provisions, this Court
made detailed observations relating to "difference between
Courts and Tribunals'', "Re: independence of judiciary",
B
"separation of powers", and "whether the Government can
transfer judicial functions traditionally performed by Courts, to
Tribunals'', as under:-
"70. But in India. unfortunately tribunals have not achieved
full independence. The Secretary of the "sponsoring c
department" concerned sits in the Selection Committee for
appointment. When the tribunals are formed. they are
mostly dependent on their sponsoring department for
funding. infrastructure and even space for functioning. The
statutes constituting tribunals routinely provide for members D
of civil services from the sponsoring departments
becoming members of the tribunal and continuing their lien
with their parent cadre. Unless wide ranging reforms as
were implemented in United Kingdom and as were
suggested by L. Chandra Kumar vs. Union of India. E
(1997) 3 SCC 261. are brought about. tribunals in India
will not be considered as independent.
Whether the Government can transfer the judicial functions
traditionally performed by courts to tribunals?
F
71. It is well settled that courts perform all judicial functions
of the State except those that are excluded by law from
their jurisdiction. Section 9 of the Code of Civil Procedure,
for example, provides that the courts shall have jurisdiction
to try all suits of a civil nature excepting suits of which their G
cognizance is either expressly or impliedly barred.
72. Article 32 provides that without prejudice to the powers
conferred on the Supreme Court by clauses (1) and (2) of
the said Article, Parliament may bY law, empower any other
H
244 SUPREME COURT REPORTS [2014] 10 S.C.R.
A court to exercise within the local limits of its jurisdiction all
or any of the powers exercisable by the Supreme Court
under clause (2) of Article 32.
73. Article 247 provides that notwithstanding anything
contained in Chapter I of Part XI of the Constitution,
B
Parliament may by law provide for the establishment of any
additional courts for the better administration of laws made
by Parliament or of any existing laws with respect to a
matter enumerated in the Union List. Article 245 provides
that subject to the provisions of the Constitution,
c Parliament may make laws for the whole or any part of the
territory of India, and the legislature of a State may make
laws for the whole or any part of the State.
74. Article 246 deals with the subject-matter of laws made
D by Parliament and by the legislatures of States. The Union
List (List I of the Seventh Schedule) enumerates the
matters with respect to which Parliament has exclusive
powers to make laws. Entry 77 of List I refers to
constitution, organisation, jurisdiction and powers of the
E Supreme Court. Entry 78 of List I refers to constitution and
organisation of the High Courts. Entry 79 of List I refers to
extension or exclusion of the jurisdiction of a High Court,
to or from any Union Territory. Entry 43 of List I refers to
incorporation, regulation and winding up of trading
F corporations and Entry 44 of List I refers to incorporation,
regulation and winding up of corporations. Entry 95 of List
I refers to jurisdiction and powers of all courts except tha
Supreme Court, with respect to any of the matters in the
Union List.
G 75. The Concurrent List (List Ill of the Seventh Schedule)
· enumerates the matters with respect to.which Parliament
and the Legislature of a State will have concurrent power
to make laws. Entry 11-A of List Ill refers to administration
of justice, constitution and organization of all courts except
H the Supreme Court and the High Courts. Entry 46 of List
MADRAS BAR ASSOCIATION v. UNION OF INDIA 245
[JAGDISH SINGH KHEHAR, J.]
Ill refers to jurisdiction and powers of all courts, except the A
Supreme Court, with respect to any of the matters in List
Ill.
76. Part XIV-A was inserted in the Constitution with effect
from 3-1-1977 by the Constitution (Forty-second
B
Amendment) Act, 1976. The said part contains two articles.
Article 323-A relates to Administrative Tribunals and
empowers Parliament to make a law, providing for the
adjudication or trial by Administrative Tribunals of disputes
and complaints with respect to recruitment and conditions
of service of persons appointed to public services and C
posts in connection with the affairs of the Government or
of any State or of any local or other authority within the
territory of India or under the control of the Government of
India or of any corporation owned or controlled by the
Government. D
xxx xxx xxx
80. The legislative competence of Parliament to provide
for creation of courts and tribunals can be traced to Entries
77, 78, 79 and Entries 43, 44 read with Entry 95 of List I, E
Entry 11-A read with Entry 46 of List Ill of the Seventh
Schedule. Referring to these articles, this Court in two
cases, namely, Union of India v. Delhi High Court Bar
Assn., (2002) 4 SCC 75, and State of Karnataka v.
Vishwabharathi House Building Coop. Society, (2003) 2 F
sec 412, held that Articles 323-A and 323-B are enabling
provisions which enable the setting up of tribunals
contem~lated therein; and that the said articles, however,
cannot be interpreted to mean that they prohibited the
legislature from establishing tribunals not covered by those G
articles, as long as there is legislative competence under
the appropriate entry in the Seventh Schedule.
xxx xxx xxx
90. But when we say that the legislature has the H
246 SUPREME COURT REPORTS [2014] 10 S.C.R.
A competence to make laws. providing which disputes will
be decided by courts. and which disputes will be decided
by tribunals. it is subject to constitutional limitations. without
encroaching upon the independence of the judiciary and
keeping in view the principles of the rule of law and
B separation of powers. If tribunals are to be vested with
judicial power hitherto vested in or exercised by courts.
such tribunals should possess the independence. security
and capacity associated with courts. If the tribunals are
intended to serve an area which requires specialised
c knowledge or expertise. no doubt there can be technical
members in addition to judicial members. Where however
jurisdiction to try certain category of cases are transferred
from courts to tribunals only to expedite the hearing and
disposal or relieve from the rigours of the Evidence Act
and procedural laws. there is obviously no need to have
D
any non-judicial technical member. In respect of such
tribunals. only members of the judiciary should be the
Presiding Officers/Members. Typical examples of such
special tribunals are Rent Tribunals. Motor Accidents
Claims Tribunals and Special Courts under several
E enactments. Therefore. when transferring the jurisdiction
exercised by courts to tribunals. which does not involve any
specialised knowledge or expertise in any field and
expediting the disposal and relaxing the procedure is the
only object, a provision for technical members in addition
F to or in substitution of judicial members would clearly be
a case of dilution of and encroachment upon the
independence of the judiciary and the rule of law and would
be unconstitutional.
G 91 In R.K. Jain v. Union of India, (1993) 4 SCC 119, this
Court observed: (SCC pp. 169-70, para 67)
"67. The tribunals set up under Articles 323-A and
323-B of the Constitution or under an Act of
legislature are creatures of the statute and in no
H case claim the status as Judges of the High Court
MADRAS BAR ASSOCIATION v. UNION OF INDIA 247
[JAGDISH Slt-:JGH KHEHAR, J.]
or parity or as substitutes. However. the personnel A
appointed to hold those offices under the State are
called upon to discharge judicial or quasi-judicial
powers. So they must have judicial approach and
also knowledge and expertise in that particular
branch of constitutionaL administrative and tax laws. B
The legal input would undeniably be more important
and sacrificing the legal input and not giving it
sufficient weightage and teeth would definitely
impair the efficacy and effectiveness of the judicial
adjudication. It is, therefore. necessary that those c
who adjudicate upon these matters should have
legal expertise. judicial experience and modicum of
legal training as on many an occasion different and
complex questions of law which baffle the minds of
even trained Judges in the High Court and
D
Supreme Court would arise for discussion and
decision."
92. Having held that legislation can transfer certain areas
of litigation from courts to tribunals and recognising that
the legislature can provide for technical members in E
addition to judicial members in such tribunals, let us turn
our attention to the question a~ to who can be the
members.
93. If the Act provides for a tribunal with a judicial me.mber
and a technical member. does it mean that there are no F
limitations upon the power of the legisrature to prescribe
the qualifications for such technical member? The question
will also be whether any limitations can be read into the
competence of the legislature to prescribe the qualification
for the judicial member? The answer, of course, depends G
upon the nature of jurisdiction that is being transferred from
the courts to tribunals. Logically and necessarily, depending
upon whether the jurisdiction is being shifted from a High
Court. or a District Court or a Civil Judge, the yardstick
will differ. It is for the court which considers the challenge H
248 SUPREME COURT REPORTS [2014] 10 S.C.R.
A to the qualification. to determine whether the legislative
power has been exercised in a manner in consonance with
the constitutional principles and constitutional guarantees.
xxx xxx xxx
B 101. Independent judicial tribunals for determination of the
rights of citizens. and for adjudication of the disputes and
complaints of the citizens. is a necessary concomitant of
the rule of law. The rule of law has several facets. one of
which is that disputes of citizens will be decided by Judges
C who are independent and impartial: and that disputes as
to legality of acts of the Government will be decided by
Judges who are independent of the executive. Another
facet of the rule of law is equality before law. The essence
of the equality is that it must be capable of being enforced
o and adjudicated by an independent judicial forum. Judicial
independence and separation of judicial power from the
executive are part of the common law traditions implicit in
a Constitution like ours which is based on the Westminster
model.
E 102. The fundamental right to equality before law and equal
protection of laws guaranteed by Article 14 of the
Constitution, clearly includes a right to have the person's
rights. adjudicated by a forum which exercises judicial
power in an impartial and independent manner, consistent
F with the recognised principles of adjudication. Therefore
wherever access to courts to enforce such rights is sought
to be abridged, altered, modified or substituted by
directing him to approach an alternative forum, such
legislative Act is open to challenge if it violates the right
G to adjudication by an independent forum. Therefore, though
the challenge by MBA is on the ground of violation of
principles forming part of the basic structure, they are
relatable to one or more of the express provisions of the
Constitution which gave rise to such principles. Though the
H vc:ilidity of the provisions of a legislative Act cannot be
MADRAS BAR ASSOCIATION v. UNION OF INDIA 249
[JAGDISH SINGH KHEHAR, J.]
challenged on the ground it violates the basic structure of A
the Constitution, it can be challenged as violative of
constitutional provisions which enshrine the principles of
the rule of law, separation of powers and independence
of the judiciary.
xxx xxx xxx B
106. We may summarise the positiQn as follows:
(a) A legislature can enact a law transferring the jurisdiction
exercised by courts in regard to any specified subject
(other than those which are vested in courts by express C
provisions of the Constitution) to any tribunal.
(b) All courts are tribunals. Any tribunal to which any
existing jurisdiction of courts is transferred should also be
a judicial tribunal. This means that such tribunal should
have as members. persons of a rank. capacity and status D
as nearly as possible equal to the rank. status and
capacity of the court which was till then dealing with such
matters and the members of the tribunal should have the
independence and security of tenure associated with
judicial tribunals. E
(c) Whenever there is need for "tribunals". there is no
presumption that there should be technical members in the
tribunals. When any jurisdiction is shifted from courts to
tribunals. on the ground of pendency and delay in courts.
and the jurisdiction so transferred does not involve any
F
technical aspects requiring the assistance of experts. the
tribunals should normally have only judicial members. Only
where the exercise of jurisdiction involves inquiry and
decisions into technical or special aspects. where
presence of technical members will be useful and G
necessary. tribunals should have· technical members.
Indiscriminate appoiqtment of technical members in all
tribunals will dilute ana adversely affect the indebendence
of the judiciary.
H
250 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (d) The legislature can reorganise the jurisdictions of
judicial tribunals. For example. it can provide that a
specified category of cases tried by a higher court can be
tried by a lower court or vice versa (a standard example
is the variation of pecuniary limits of the courts). Similarly
B while constituting tribunals, the legislature can prescribe the
qualifications/eligibility criteria. The same is however
subject to judicial review. If the court in exercise of judicial
review is of the view that such tribunalisation would
adversely affect the independence of the judiciary or the
c standards of the judiciary. the court may interfere to
preserve the independence and standards of the judiciary.
Such an exercise will be part of the checks and balances
measures to maintain the separation of powers and to
prevent any encroachment. intentional or unintentional. by
either the legislature or by the executive.
D
)()()( )()()( )()()(
113. When the Administrative Tribunals were constituted.
the presence of members of civil services as Technical
(Administrative) Members was considered necessary. as
E they were well versed in the functioning of government
departments and the rules and procedures applicable to
government servants. But the fact that senior officers of civil
services could function as Administrative Members of the
Administrative Tribunals. does not necessarily make them
F suitable to function as technical members in the Company
Law Tribunals or other tribuna·ls requiring technical
expertise. The tribunals cannot become providers of
sinecure to members of civil services. l2Y appointing them
as technical members. though they may not have technical
G expertise in the field to which the tribunals relate. or worse.
where purely judicial functions are involved. While one can
understand the presence of the members of the civil
services being technical members in Administrative
Tribunals. or Military Officers being members of the Armed
H Forces Tribunals. or electrical engineers being members
MADRAS BAR ASSOCIATION v. UNION OF INDIA 251
[JAGDISH SINGH KHEHAR, J.]
of the Electricity Appellate Tribunal. or telecom engineers A
being members of TDSAT. we find no logic in members
of the general civil services being members of the
Company Law Tribunals.
114. Let us now refer to the dilution of independence. If 8
any member of the tribunal is permitted to retain his lien
over his post with the parent cadre or ministry or
department in the civil service for his entire period of
service as member of the tribunal. he would continue to
think. act and function as a member of the civil services. C
A litigant may legitimately think that such a member will not
be independent and impartial. We reiterate that our
observations are not intended to cast any doubt about the
honesty and integrity or capacity and capability of the
officers of civil services in particular those who are of the
rank of Joint Secretary or for that matter even junior D
officers. What we are referring to is the perception of the
litigants and the public about the independence or conduct
of the members of the tribunal. Independence. impartiality
and fairness are qualities which have to be nurtured and
developed and cannot be acquired overnight. The E
independence of members discharging judicial functions
in a tribunal cannot be diluted.
)()()( )()()( )()()(
F
120. We may tabulate the corrections required to set right
the defects in Parts 1-B and 1-C of the Act:
(1) Only Judges and advocates can be considered for
appointment as judicial members of the Tribunal. Only High
Court Judges, or Judges who have served in the rank of G
a District Judge for at least five years or a person who has
practised as-a lawyer for ten years can be considered for
appointment as a judicial member. Persons who have held
a Group A or equivalent post under the Central or State
Government with experience in the Indian Company Law H
252 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Service (legal Branch) and the Indian Legal Service
(Grade I) c3nnot be considered for appointment as judicial
members as provided in sub-sections (2)(c) and (d) of
Section 10-FD. The expertise in Company Law Service
or the Indian Legal Service will at best enable them to be
B considered for appointment as technical members.
(ii) As NCLT takes over the functions of the 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
c 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
D be considered for appointment as technical members of
the National Company Law Tribunal. Clat.ises (c) and (d)
of sub-section (2) and clauses (a) and (b) of sub-section
(3) of Section 10-FD which provide for persons with 15
years experience in Group A post or persons holding the
E post of Joint Secretary or equivalent post in the Central or
the State Government, being qualified for appointment as
Members of Tribunal, are invalid.
I·
(iit) A "technical member" presupposes an experience in
the field to which the Tribunal relates. A member of the
F Indian Company Law Service who has worked with
Accounts Branch or officers in other departments who
might have incidentally dealt with some aspect of company
law cannot be considered as "experts" qualified to be
appointed as technical members. Therefore clauses' (a)
G and (b) of sub-sectiosi (3) are not valid.
(iv) The first part of clause (f) of sub-section (3) providing
that any person having special knowledge or'professional
experience of 20 years in science, technology, economics,
bankingr industry could be considered to be persons with
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 253
[JAGDISH SINGH KHEHAR, J.]
expertise in company law, for being appointed as technical A
members in the Company Law Tribunal, is invalid.
(v) Persons having ability, integrity, standing and special
knowledge and professional experience of not less than
fifteen years in industrial finance, industrial management,
industrial reconstruction, investment and accountancy, may 8
however be considered as persons having expertise in
. rehabilitation/revival of companies and therefore, eligible
for being considered for appointment as technical
members.
(v1) In regard to category of persons referred in clause (g)
c
of sub-section (3) at least five years' experience should be
specified.
(vii) Only clauses (c), (d), (e), (g), (h), and the latter part of
clause (f) in sub-section (3) of Section 10-FD and officers D
of civil services of the rank of the Secretary or Additional
Secretary in the Indian Company Law Service and the
ln8ian Legal Service can be considered for purposes of
appointment as technical members of the Tribunal.
(viii) Instead of a five-member Selection Committee with E
the Chief Justice of India (or his nominee) as Chairperson
and two Secretaries from the Ministry of Finance and
Company Affairs and the Secretary in the Ministry of
Labour and the Secretary in the Ministry of Law and
Justice as members mentioned in Section 10-FX, the F
Selection Committee should broadly be on the following
lines:
(a) Chief Justice of India or his nominee-
Chairperson (with a casting vote);
G
(b) A Senior Judge of the Supreme Court or Chief
Justice of High Court-Member;
(c) Secretary in the Ministry of Finance and
Company Affairs-Member; and
H
254 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (d) Secretary in the Ministry of Law and Justice-
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 te(rrf: This is· because·
B considerable time is required to achieve expertise in the
field concerned. 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 retirement age of 65 years
c 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 they
should be able to attract younger members who will have
D a reasonable period of service.
(x) The second proviso to Section 10-FE enabling the
President and members to retain lien with their parent
cadre/ministry/department while holding office as
President or Members will not be conducive for the
E independence of members. Any person appointed as
member should be prepared to totally disassociate himself
from the executive. The lien cannot therefore exceed a
period of one year.
(x1) To maintain independence and security in service, sub-
F
section (3) of Section 10-FJ and Section 10-FV should
provide that suspension of the President/Chairman or
member of a Tribunal can be only with the concurrence of
the Chief Justice of India.
G (xii) The administrative support for all Tribunals should be
from the Ministry of Law and Justice. Neither the Tribunals
nor their members shall seek or be provided with facilities
from the respective sponsoring or parent Ministries or
Department concerned.
H (xiii) Two-member Benches of the Tribunal should always
MADRAS BAR ASSOCIATION v. UNION OF INDIA 255
[JAGDISH SINGH KHEHAR, J.]
have a judicial member. Whenever any larger or special A
Benches are constituted, the number of technical members
shall not exceed the judicial members."
62. Before venturing to examine the controversy in hand it
needs to be noticed, that some of the assertions raised at the
hands of the petitioners in the present controversy have since B
been resolved. These have been noticed in an order passed
by this Court in Madras Bar Association v. Union of India,
(2010) 11 sec 67' which is being extracted hereunder:-
"1. In all these petitions, the constitutional validity of the C
National Tax Tribunal Act, 2005 ("the Act", for short) is
challenged. In TC No. 150 of 2006, additionally there is a
challenge to Section 46 of the Constitution (Forty-second
Amendment) Act, 1976 and Article 323-B of the
Constitution of India. It is contended that Section 46 of the o
Constitution (Forty-second Amendment) Act, is ultra vires
the basic structure of the Constitution as it enables
proliferation of the tribunal system and makes serious
inroads into the independence of the judiciary by providing
a parallel system of administration of justice, in which the E
executive has retained extensive control over matters such
as appointment, jurisdiction, procedure, etc. It is contended
that Article 323-B violates the basic structure of the
Constitution as it completely takes away the jurisdiction of
the High Courts and vests them in the National Tax Tribunal,
F
including trial of offences and adjudication of pure
questions of law, which have always been in the exclusive
domain of the judiciary.
2. When these matters came up on 9-1-2007 before a ·
three-Judge Bench, the challenge to various sections of the G
Act was noticed.
3. The first challenge was to Section 13 which permitted
"any person" duly authorised to appear before the National
Tax Tribunal. The Union of India submitted that the H
256 SUPREME COURT REPORTS [2014] 10 S.C.R.
A appropriate amendment will be made in the Act to ensure
that only lawyers, chartered accountants and parties in
person will be permitted to appear before the National Tax
Tribunal.
4. The second challenge was to Section 5(5) of the Act
B
which provided that:
"5. (5) The Central Government may in consultation
with the Chairperson transfer a member from
headquarters of one Bench in one State to the
c headquarters of another Bench in another State or
to the headquarters of any other Bench within a
State:"
5. The Union of India submitted that having regard to the
D nature of the functions to be performed by the Tribunal and
the constitutional scheme of separation of powers and
independence of judiciary, the expression "consultation
with the Chairperson" occurring in Section 5(5) of the Act
should be read and construed as "concurrence of the
Chairperson".
E
6. The third challenge was to Section 7 which provided for
a Selection Committee comprising of (a) the Chief Justice
of India or a Judge of the Supreme Court nominated by
him, (b) Secretary in the Ministry of Law and Justice, and
F (c) Secretary in the Ministry of Finance. It was contended
by the petitioners that two of the members who are
•·Secretaries to l:h€.Government forming the majority may
override.the opinion ~f the Chief Justice or his nominee
which was improper. It was stated on behalf of the Union
G of India that there was no question of two Secretaries
overriding the opinion of the Chief Justice of India or his
nominee since primacy of the Chairperson was inbuilt in
the system and this aspect will be duly clarified.
7. In regard to certain other defects in the Act, pointed out
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 257
[JAGDISH SINGH KHEHAR, J.]
by the petitioners, it was submitted that the Union A
Government will examine them and wherever necessary
suitable amendments will be made.
8. In view of these submissions, on 9-1-2007, this Court
made an order reserving liberty to the Union Government B
to mention the matter for listing after the appropriate
amendments were made in the Act.
9. On 21-1-2009, when arguments in CA No. 3067 of 2004
and CA No. 3717 of 2005, which related to the challenge
to Parts 1-B and 1-C of the Companies Act, 1956 were in C
progress before the Constitution Bench, it was submitted
that these matters involved a similar issue and they could
be tagged and disposed of in terms of the decision in
those appeals. Therefore the Constitution Bench directed
these cases to be listed with those appeals, even though D
there is no order of reference in these matters. CA No.
3067 of 2004 and CA No. 3717 of 2005 were
subsequently heard at length and were reserved for
judgment. These matters which were tagged were also
reserved for judgment. E
10. We have disposed of CA No. 3067 of 2004 and CA
No. 3717 of 2005 today (Union of India vs. Madras Bar
Association, (2010) 11 SCC 1), by a separate order.
Insofar as these cases are concerned, we find that TC
F
(Civil) No. 150 of 2006 involves the challenge to Article
323-B of the Constitution. The said article enables
appropriate legislatures to provide by law, for adjudication
or trial by tribunals or any disputes, complaints, or offences
with respect to all or any of the matters specified in clause
(2) thereof. Sub-clause (i) of clause (2) of Article 323-B G
. enables such tribunals to try offences against laws with
respect to any of the matters specified in sub-clauses (a)
to (h) of clause (2) of the said article.
11. One of the contentions urged in support of the H
258 SUPREME COURT REPORTS [2014] 10 S.C.R.
A challenge to Article 323-B relate to the fact that tribunals
do not follow the normal rules of evidence contained in the
Evidence Act, 1872. In criminal trials, an accused is
presumed to be innocent till proved guilty beyond
reasonable doubt, and the Evidence Act plays an
B important role, as appreciation of evidence and
consequential findings of facts are crucial. The trial would
require experience and expertise in criminal law, which
means that the Judge or the adjudicator to be legally
trained. Tribunals which follow their own summary
c procedure, are not bound by the strict rules of evidence
and the members will not be legally trained. Therefore it
may lead to convictions of persons on evidence which is·
not sufficient in probative value or on the basis of
inadmissible evidence. It is submitted that it would thus be
a retrograde step for separation of executive from the
D
judiciary.
12. Appeals on issues on law are traditionally heard by the
courts. Article 323-B enable constitution of tribunals which
will be hearing appeals on pure questions of law which is
E the function of the courts. In L. Chandra Kumar v. Union of
India, (1997) 3 SCC 261, this Court considered the validity
of only clause (3}ld) of Article 323-B but di<! nQt consider
the validity of other provisions of Article 323-B.
F 13. The appeals relating to constitutional validity of the
National Company Law Tribunals under the Companies
Act, 1956 did not involve the consideration of Article 323-
B. The constitutional issues raised in TC (Civil) No. 150
of 2006 were not touched on as the__power to establish
Company Tribunals was not traceable to Article 323-B but
G
to several entries of Lists I and II I of the Seventh Schedule
and consequently there was no challenge to this article.
14. The basis of attack in regard to Parts 1-B and 1-C of
the Companies Act and the provisions of the NTI Act are
H completely different. The challenge to Parts 1-B and 1-C of
MADRAS BAR ASSOCIATION v. UNION OF INDIA 259
[JAGDISH SINGH KHEHAR, J.]
the Companies Act, 1956 seeks to derive support from A
Artie!~ 323-B by contending that Article 323-B is a bar for
constitution of any tribunal in respect of matters not
enumerated therein. On the other hand the challenge to the
NTI Act is based on the challenge to Article 323-B itself.
B
15. We therefore find that these petitions relating to the
validity of the NTI Act and the challenge to Article 323-B
raise issues which did not arise in the two civil appeals.
Therefore these cases cannot be disposed of in terms of
the decision in the civil appeals but require to be heard C
separately. We accordingly direct that these matters be
delinked and listed separately for hearing."
63(i) A perusal of the judgment rendered in Kesavananda
Bharati case (supra) reveals, that "separation of powers"
creates a system of checks and balances, by reasons of which, D
powers are so distributed, that none of the three organs
transgresses into the domain of the other. The concept ensures
the dignity of the individual. The power of "judicial review"
ensures, that executive functioning confines itself within the
framework of law enacted by the legislature. Accordingly, the E
demarcation of powers between the legislature, the executive
and the judiciary, is regarded as the basic element of the
constitutional scheme. When the judicial process is prevented
by law, from determining whether the action taken, was or was
not, within the framework of the legislation enacted, it would F
amount to the transgression of the adjudicatory/determinatory
process by the legislature. Therefore, the exclusion of the
power of "judicial review", would strike at the "basic structure"
of the Constitution.
(ii) Jn Indira Nehru Gandhi case (supra), this Court arrived G
at the conclusion, that clause (4) of Article 329A of the
Constitution, destroyed not only the power of "judicial review",
but also the rule of "separation of powers". By the ~bove
legislative provision, an election declared void, on the
culmination of an adjudicatory process, was treated as valic:I. H
260 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Meaning thereby, that the judicial process was substituted by
a legislative pronouncement. It was held, that the issue to be
focused on was, whether the amendment which was sought to
be assailed, violated a principle which constituted the "basic
structure" of the Constitution. The argument raised in opposition
B was, that a determination which had a bearing on just one (or
a few) individual(s) would not ra'ise such an issue. The query
was answered by concluding, that it would make no difference
whether it related to one case, or a large number of cases.
Encroachment on the "basic structure" of the Constitution would
c be invalid, irrespective of whether, it related to a limited number
of individuals or a large number of people. The view expressed
was, that if lawmakers were to be assigned the responsibility
of administering those laws, and dispensing justice, then those
governed by such laws would be left without a remedy in case
they were subjected to injustice. For the above reason, clause
0
(4) of Article 329A was declared invalid. This .Court by majority
held, that clauses (4) and (5) of Article 329A were
unconstitutional and void.
(iii) In Minerva Mills Ltd. case (supra), first and foremost,
E this Court confirmed the view expressed in Kesavananda
Bharati case (supra) and Indira Nehru Gandhi case (supra), that
the amending power of the Parliament, was not absolute. The
Parliament, it was maintained, did not have the power to amend
the "basic structure" of the Constitution. A legislative assertion,
F that the enacted law had been made, for giving effect to a policy
to secure the provisions made in Part IV of the Constitution,
had the effect of excluding the adjudicatory process. In the case
on hand, this Court arrived at the conclusion, that Section 4 of
the Constitution (Forty-second Amendment) Act was beyond the
G amending power of the Parliament, and the same was void,
because it had the effect of damaging the basic and essential
features of the Constitution and destroying its "basic structure",
by totally excluding any challenge to any law, even on the
ground, whether it was inconsistent with or it had abridged, any
H of the rights conferred by Articles 14 and 19 of the Constitution.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 261
[JAGDISH SINGH KHEHAR, J.]
Furthermore, Section 55 of the Constitution (Forty-second A
Amendment), Act was held to be beyond the amending power
of the Parliament. It was held to be void, as it had the effect of
removing all limitations on the powers of Parliament, to amend
the Constitution including, the power to alter its basic and
essential features, i.e., its "basic structure". According to this B
Court, the reason for a broad "separation of powers" under the
Constitution was, because concentration of powers in any one
of the organs of the Government, would destroy the foundational
premise of a democratic Government. The illustrations narrated
in the judgment are of some relevance. We shall therefore, c
narrate them hereunder, in our own words:
(a) Take for example a case where the executive, which
is in-charge of administration, acts to the prejudice of a citizen.
And a question arises, as to what are the powers of the
executive, and whether the executive had acted within the D
scope of its powers. Such a question obviously, cannot be left
to the executive to decide, for two very good reasons. Firstly,
because the decision would depend upon the interpretation of
the Constitution or the laws, which are, pre-eminently fit to be
decided by the judiciary, as it is the judiciary alone which would E
be possessed of the expertise in decision making. And
secondly, because the legal protection afforded to citizens by
the Constitution or the laws would become illusory, if it were
left to the executive to determine the legality, of its own actions.
(b) Take for example, a case where the legislature makes F
a law, which is to the prejudice of a citizen. And a dispute
arises, whether in making the law the legislature had acted
outside the area of its legislative competence, or whether the
law was violative of the fundamental rights of the citizen, or of
some other provision(s) of law. Its resolution cannot be left to G
the legislature to decide, for two very good reasons. Firstly,
because the decision would depend upon the interpretation of
the Constitution or the laws, which are, pre-eminently fit to be
decided by the judiciary, as it is the judiciary alone which would
be possessed of the expertise in decision making. And H
'··
262 SUPREME COURT REPORTS [2014] 10 S.C.R.
A secondly, because the legal protection afforded to citizens, by
the Constitution or the laws would become illusory, if it were
left to the legislature to determine the legality of its own actions.
On the basis of the examples cited above, this Court
concluded, that the creation of an independent machinery, for
B resolving disputes, was constitutionally vested with the judiciary.
The judiciary was vested with the power of "judicial review", to
determine the legality of executive action, and the validity of laws
enacted by legislature. It was further held, that it was the solemn
duty of the judiciary under the Constitution, to keep the different
C organs of the State, such as the executive and· the legislature,
within the limits of the powers conferred upon them by the
Constitution. It was accordingly also held, that the power of
"judicial review" was an integral part of India's constitutional
system, and without it, the "rule of law'' would become a teasing
D illusion, and a promise of unreality. Premised on the aforesaid
inferences, this Court finally concluded, that if there was one
feature of the Indian Constitution, which more than any others,
was its "basic structure" fundamental to the maintenance of
democracy and the "rule of law", it was the power of "judicial
E review". While recording the aforementioned conclusion, this
Court also recorded a clarificatory note, namely, that it should,
not be taken, that an effective alternative institutional mechanism
or arrangement for "judicial review" could not be made by
Parliament. It was, however, clearly emphasized, that "judicial
F review" was a vital principle of the Indian Constitution, and it
could not be abrogated, without affecting the "basic structure"
of the Constitution. It is therefore, that it came to be held, that
a constitutional amendment, which had the effect of taking away
the power of "judicial review", by providing, that it would not be
G liable to be questioned, on any ground, was held to be beyond
the amending power of the Parliament. For, that would make
the Parliament the sole judge, of the constitutional validity, of
what it had done, and thereby, allow it to determine the legality
of its own actions. In the above judgment, the critical reflection,
H in our considered view was expressed by the words, "Human
MADRAS BAR ASSOCIATION v. UNION OF INDIA 263
[JAGDISH SINGH KHEHAR, J.]
ingenuity, limitless though it may be, has yet not devised a A
system, by which the liberty of the people can be protected,
except for the intervention of the courts of law''.
(iv) In S.P. Gupta case (supra), the concept of
"independence of judiciary" came up for consideration before
this Court. This Court having examined the issue, arrived at B
certain conclusions with reference to High Court and Supreme
Court Judges. It was held, that their appointment and removal,
as also their transfer, deserved to be preserved, within the
framework of the judicial fraternity. Likewise, the foundation of
appointment of outside Chief Justices, was made with a similar C
objective. Based on the same, parameters were also laid down,
in respect of appointment of Judges to the Supreme Court. The
consideration even extended to the appointment of the Chief
Justice of the Supreme Court. All this, for ensuring judicial
autonomy. It was felt that independence of the judiciary, could D
be preserved only if primacy in the above causes rested with
the judiciary itself, with a minimal involvement of the executive
and the legislature. It needs to be highlighted, that"
independence of judges of the High Courts and the Supreme
Court was considered as salient, to ensure due exercise of the E
power of "judicial review". It would be pertinent to mention, that
the judgment rendered by this Court in S.P. Gupta case (supra)
came to be doubted in Subhash Sharma v. Union of India,
(1991) Suppl. 1 SCC 574. Thereupon, the matter was
reconsidered by a constitution bench of nine Judges in, F
Supreme Court Advocates on Record Association v. Union of
India, (1993) 4 SCC 441. On the subject of preserving
independence in respect of appointment of judges of the High
Courts, as also their transfer, the position recorded earlier in
S.P.Gupta case (supra) remained substantially unaltered. So G
also, of appointments of Chief Justices of High Courts and the
Supreme Court. It was reiterated, that to ensure judicial
independence, primacy in all these matters should be with the
judiciary.
(v) Having recorded the determination rendered by this H
264 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Court to the effect that "separation cifpOWeFS,;, "rule of law" and
"judicial review" at the hands of an independent judiciary,
constitute the "basic structure" of the Constitution, we are in a
position now to determine, how the aforesaid concepts came
to be adopted by this Court, while adjudicating upon the validity
8 of provisions similar to the ones, which are subject of
consideration, in the case on hand. The first controversy arose
with reference to the Administrative Tribunals Act, 1985, which
was enacted under Article 323A of the Constitution. In S.P.
Sampath Kumar case (supra), it was sought to be concluded,
C that the power of "judicial review" had been negated by the
aforementioned enactment, inasmuch as, the avenue of redress
under Articles 226 and 227 of the Constitution before the High
Court, was no longer available. It was also sought to be
asserted, that the tribunal constituted under the enactment,
bei_ng a substitute of the High Court, ought to have been
D constituted in a manner, that it would be able to function in the
same manner as the High Court itself. Since insulation of the
judiciary from all forms of interference, even from the coordinate
branches of the Government, was by now being perceived as
a basic essential feature of the Constitution, it was felt that the
E same independence from possibility of executive pressure or
influence, needed to be ensured for the Chairman, Vice
Chairman and Members of the administrative tribunal. In
recording its conclusions, even though it was maintained, that
"judicial review" was an integral part of the "basic structure" of
F the Constitution, yet it was held, that Parliament was competent
to amend the Constitution, and substitute in place of the High
Court, another alternative institutional mechanism or
arrangement. This Court, however cautioned, that it was
imperative to ensure, that the alternative arrangement, was no
G less independent, and no less judicious, than the High Court
(which was sought to be replaced) itself. This was conveyed
by observing, "if any constitutional amendment made by the
Parliament takes away from the High Court the power of
"judicial review" in any particular area, and vests it in any other
H institutional mechanism or authority, it would not be violative of
MADRAS BAR ASSOCIATION v. UNION OF INDIA 265
[JAGDISH SINGH KHEHAR, J.]
the basic structure doctrine so long as the essential condition A
is fulfilled, namely, that the alternative institutional mechanism
or authority set up by the Parliament by amendment is no less
effective than the High Court". The exclusion of the High Courts'
jurisdiction under Articles 226 and 227 of the Constitution, it
was held, would render the Administrative Tribunals Act, 1985 B
unconstitutional, unless the amendments to the provisions of
Sections 4, 6 and 8 thereof, as suggested by this Court, were
carried out. Insofar as Section 4 is concerned, it was suggested
that it must be amended so as not to confer absolute and
unfettered discretion on the executive in matters of appointment c
of th"e Chairman, Vice Chairman and Members of the
administrative tribunals. Section 6(1)(c) was considered to be
invalid, and as such, needed to be deleted. It was also
indicated, that appointment of Chairman, Vice Chairman and
Administrative Members should be made by the executive, only D
in consultation with the Chief Justice of India, and that, such
consultation had to be meaningful and effective, inasmuch as,
ordinarily the recommendation of the Chief Justice of India
ought to be accepted, unless there were cogent reasons not
to. If there were any reasons, for not accepting the E
recommendation, they needed to be disclosed to the Chief
Justice. Alternatively, it was commended, that a high powered
Selection Committee headed by the Chief Justice or a sitting
Judge of the Supreme Court, or of the concerned High Court
(nominated by the Chief Justice of India), could be set up for
such selection. If either of these two modes of appointment was F
adopted, it was believed, that the impugned Act would be saved
from invalidation. It was mentioned, that Section 6(2) also
needed to be amended, so as to make a District Judge or an
Advocate, who fulfilled the qualifications for appointment as a
judge of the High Court, eligible for appointment as Vice G
Chairman. With reference to Section 8 it was felt, that a term
of five years of office, would be too short and ought to be
suitably extended. It was so felt, because the presently
prescribed tenure would neither be convenient to the persons
selected for the job, nor expedient to the scheme of H
266 SUPREME COURT REPORTS [2014] 10 S.C.R.
· Aadjudication contemplated under the Administrative Tribunals
Act. It was also opined, that the Government ought to set up a
permanent bench wherever there was a seat of the High Court.
And if that was not feasible, at least a circuit bench of the
administrative tribunal, wherever there is a seat of the High
B Court. That would alleviate the hardship, which would have to
be faced by persons, who were not residing close to the places
at which the benches of the tribunal were set up. In this behalf,
it may only be stated that all the suggestions made by this Court
were adopted.
c (vi) Post S.P. Sampath Kumar case (supra), divergent
views came to be expressed in a number of judgments
rendered by this Court. It is therefore, that the judgment in S.P.
Sampath Kumar case (supra), came up for reconsideration in
L. Chandra Kumar case (supra). On reconsideration, this Court
D declared, that the power of "judicial review" over legislative
action was vested in the High Courts under Article 226, and in
the Supreme Court under Article 32 of the Constitution. "Judicial
review'' was again held to be an integral and essential feature
of the Constitution, constituting its "basic structure". It was further
E concluded, that ordinarily the power of High Courts and the
Supreme Court, to test the constitutional validity of legislations,
could never be ousted or excluded. It was also held, that the
power vested in the High Courts of judicial superintendence
over all Courts and tribunals within their respective jurisdictions,
F was also part of the "basic structure" of the Constitution. And
that, a situation needed to be avoided where High Courts were
divested from their judicial functions, besides the power of
constitutional interpretation. Referring to the inappropriate and
ineffective functioning of the tribunals, this Court observed, that
G the above malady was on account of lack of the responsibility,
of fulfilling the administrative requirements of administrative
tribunals. It was opined, that the malady could be remedied by
creating a single umbrella organization, to ensure the
independence of the members of such tribunals, and to provide
H funds for the fulfillment of their administrative requirements.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 267
[JAGDISH SINGH KHEHAR, J.]
Although the determination of the governmental organization, A
to discharge such a role was left open, it was recommended,
, that it should preferably be vested with the Law Department.
With reference to the controversies which arose before the
tribunals, it was held, that matters wherein interpretation of
statutory provisions or rules, or where the provisions of the 8
Constitution were expected to be construed, the same would
have to be determined by a bench consisting of at least two
Members, one of whom must be a Judicial Member. Having
found that the provisions of the Administrative Tribunals Act,
had impinged on the power of "judicial review" vested in the C
High Court, clause (2)(d) of Article 323A and clause (3)(d) of
Article 3238, to the extent they excluded the jurisdiction of the
High Courts and the Supreme Court under Articles 226/227 and
32 of the Constitution, were held to be unconstitutional.
Likewise, the "exclusion of jurisdiction" clauses in all other D
legislations enacted under the aegis of Articles 323A and
3238, were also held to be unconstitutional. In view of the
above, it was concluded, that the jurisdiction conferred upon the
High Court underArticles 226/227, and upon the Supreme
Court under Article 32 of the Constitution, was a part of the
inviolable "basic structure" of the Constitution. Since the said E
jurisdiction could not be ousted, jurisdiction vested in the
tribunals would be deemed to be discharging a supplemental
role, in the exercise of the powers conferred by Articles 226/
227 and 32 of the Constitution. Although it was affirmed, that
such tribunals would be deemed to be possessed of the F
competence to test the constitutional validity of the statutory
provisions and rules, it was provided, that all decisions of
tribunals would be subject to scrutiny before a division bench
of the High Court, within whose jurisdiction the concerned
tribunal had passed the order. In the above view of the matter, G
it was held that the tribunals would act like courts of first
instance, in respect of the areas of law, for which they had been
constituted. After adjudication at the hands of the tribunals, it
would be open for litigants to directly approach the High Courts.
Section 5(6) of the Administrative Tribunals Act, interpreted in H
268 SUPREME COURT REPORTS (2014] 10 S.C.R.
A the manner indicated above, was bestowed with validity.
(vii) In Union of India v. Madras Bar Association case
(supra), all the conclusions/propositions narrated above, were
reiterated and followed, whereupon the fundamental
requirements, which need to be kept in mind while transferring
8 adjudicatory functions from courts to tribunals, were further
crystalised. It came to be unequivocally recorded that tribunals
vested with judicial power (hitherto before vested in, or
exercised by courts), should possess the same independence,
security and capacity, as the courts which the tribunals are
C mandated to substitute. The Members of the tribunals
discharging judicial functions, could only be drawn from sources
possessed of expertise in law, and competent to discharge
judicial functions. Technical Members can be appointed to
tribunals where technical expertise is essential for disposal of
D matters, and not otherwise. Therefore it was held, that where
the adjudicatory process transferred to tribunals, did not involve
any specialized skill, knowledge or expertise, a provision for
appointment of Technical Members (in addition to, or in
substitution of Judicial Members) would constitute a clear case
E of delusion and encroachment upon the independence of the
judiciary, and the "rule of law". The stature of the members, who
would constitute the tribunal, would depend on the jurisdiction
which was being transferred to the tribunal. In other words, if
the jurisdiction of the High Court was transferred to a tribunal,
F the stature of the members of the newly constituted tribunal,
should be possessed of qualifications akin to the judges of the
High Court. Whereas in case, the jurisdiction and the functions
sought to be transferred were being exercised/performed by
District Judges, The Members appointed to the tribunal should
G be possessed of eqUivalent qualifications and commensurate
stature of District Judges. The conditions of service of the
members should be such, that they are in a position to
discharge their duties in an independent and impartial manner.
The manner of their appointment and removal including their
H transfer, and tenure of their employment, should have adequate
MADRAS BAR ASSOCIATION v. UNION OF INDIA 269
[JAGDISH SINGH KHEHAR, J.]
protection so as to be shorn of legislative and executive A
interference. The functioning of the tribunals, their infrastructure
and responsibility of fulfilling their administrative requirements
ought to be assigned to the Ministry of Law and Justice. Neither
the tribunals nor their members, should be required to seek any
facilities from the parent ministries or department concerned. B
Even though the legislature can reorganize the jurisdiction of
judicial tribunals, and can prescribe the qualifications/eligibility
of members thereof, the same would be subject to "judicial
review" wherein it would be open to a court to hold, that the
tribunalization would adversely affect the adjudicatory c
standards, whereupon it would be open to a court to interfere
therewith. Such an exercise would naturally be, a part of the
checks ~nd balances measures, conferred by the Constitution
on the judiciary, to maintain the rule of "separation of powers"
to prevent any encroachment by the legislature or the executive. D
64. The position of law summarized in the foregoing
paragraph constitutes a declaration on the concept of the "basic
structure", with reference to the concepts of "separation of
powers", the "rule of law", and "judicial review". Based on the
conclusions summarized above, it will be possible for us to E
answer the first issue projected before us, namely, whether
"judicial review" is a part of the "basic structure" of the
Constitution. The answer has inevitably to be in the affirmative.
From the above determination, the petitioners would like us to
further conclude, that the power of "judicial review" stands F
breached with the promulgation of the NTI Act. This Court in
Minerva Mills Ltd. case (supra) held, that it should not be taken,
that an effective alternative institutional mechanism or
arrangement for "judicial review" could not be made by
Parliament. The same position was reiterated in S.P. Sampath G
Kumar case (supra), namely, that "judicial review" was an
int~gral part of the "basic structure" of the Constitution. All the
same it was held, that Parliament was competent to amend the
Constitution, and substitute in place of the High Court, another
'alternative institutional mechanism (court or tribunal). It would H
270 SUPREME COURT REPORTS [2014] 10 S.C.R.
A be pertinent to mention, that in so concluding, this Court added
a forewarning, that the alternative institutional mechanism set
up by Parliament through an amendment, had to be no less
effective than the High Court itself. In L. Chandra Kumar case
(supra), even though this Court held that the power of "judicial
B review" over legislative action vested in High Courts, was a part
of the "basic structure", it went on to conclude that "ordinarily"
the power of High Courts to test the constitutional validity of
legislations could never be ousted. All the same it was held,
that the powers vested in High Courts to exercise judicial
c superintendence over decisions of all courts and tribunals within
their respective jurisdictions, was also a part of the "basic
structure" of the Constitution. The position that Parliament had.
the power to amend the Constitution, and to create a court/
tribunal to discharge functions which the High Court was
discharging, was reiterated, in Union of India v. Madras Bar
0
Association case (supra). It was concluded, that the Parliament
was competent to enact a law, transferring the jurisdiction
exercised by High Courts, in regard to any specified subject,
to any court/tribunal. But it was clarified, that Parliament could
E not transfer power vested 1n the High Courts, by the Constitution
itself. We therefore have no hesitation in concluding, that
appellate powers vested in the High Court under different
stat~tory provisions, can definitely be transferred from the High
Court to other courts/tribunals, subject to the satisfaction of
norms declared by this Court. Herein the jurisdiction transferred
F by the NTT Act was with regard to specified subjects under tax
related statutes. That, in our opinion, would be permissible in
terms of the position expressed above. Has the NTT Act
transferred any power vested in courts by the Constitution? The
answer is in the negative. The power of "judicial review" vested
G in the High Court under Articles 226 and 227 of the
Constitution, has remained intact. This aspect of the matter, has
a substantial bearing, to the issue in hand. And will also lead
to some important inferences. Therefore, it must never be
overlooked, that since the power of "judicial review" exercised
H by the High Court under Articles 226 and 227 of the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 271
[JAGDISH SINGH KHEHAR, J.]
Constitution has remained unaltered, the power vested in High A
Courts to exercise judicial superintendence over the benches
of the NTT within their respective jurisdiction, has been
consciously preserved. This position was confirmed by the
learned Attorney General for India, during the course of hearing.
Since the above jurisdiction of the High Court has not been B
ousted, the NTT will be deemed to be discharging a
supplemental role, rather than a substitutional role. In the above
view of the matter, the submission that the NJT Act violates the
"basic structure" of the Constitution, cannot be acquiesced to.
65. Even though we have declined to accept the contention C
advanced on behalf of the petitioners, premised on the "basic
structure" theory, we feel it is still essential for us, to deal with
the submission advanced on behalf of the respondents in
response. We may first record the contention advanced on
behalf of the respondents. It was contended, that a legislation D
(not being an amendment to the Constitution), enacted in
consonance of the provisions of the Constitution, on a subject
within the realm of the concerned legislature, cannot be assailed
on the ground that it violates the "basic structure" of the
Constitution. For the present controversy, the respondents had E
placed reliance on Articles 245 and 246 of the Constitution, as
also, on entries 77 to 79, 82 to 84, 95 and 97 of the Union List
of the Seventh Schedule, and on entries 11A and 46 of the
Concurrent List of the Seventh Schedule. Based thereon it was
asserted, that Parliament was competent to enact the NTT Act. F
For examining the instant contention, let us presume it is so.
Having accepted the above, our consideration is as follows.
The Constitution regulates the manner of governance in
substantially minute detail. It is the fountainhead distributing
power, for such governance. The Constitution vests the power G
of legislation at the Centre, with the Lok Sabha and the Rajya
Sabha, and in the States with the State Legislative Assemblies
(and in some States, the State Legislative Councils, as well).
The instant legislative power is regulated by "Part XI" of the
Constitution. The submission advanced at the hands of the H
272 SUPREME COURT REPORTS [2014] 10 S.C.R.
A learned counsel for the respondents, insofar as the instant
aspect of the matter is concerned, is premised on the assertion
that the NTT Act has been enacted strictly in consonance with
the procedure depicted in "Part XI" of the Constitution. It is also
the contention of the learned counsel for the respondents, that
8 the said power has been exercised strictly in consonance with
the subject on which the Parliament is authorized to legislate.
Whilst dealing with the instant submission advanced at the
hands of the learned counsel for the respondents, all that needs
to be stated is, that the legislative power conferred under "Part
XI" of the Constitution has one overall exception, which
C undoubtedly is, that the "basic structure" of the Constitution,
cannot be infringed, no matter what. On the instant aspect, some
relevant judgments, rendered by constitutional benches of this
Court, have been cited hereinabove. It seems to us, that there
is a fine difference in what the petitioners contend, and what
D the respondents seek to project. The submission advanced at
the hands of the learned counsel for the petitioners does not
pertain to lack of jurisdiction or inappropriate exercise of
jurisdiction. The submission advanced at the hands _of the
learned counsel for the petitioners pointedly is, that it is
E impermissible to legislate in a manner as would violate the
"basic structure" of the Constitution. This Court has repeatedly
held, that 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
F out, by following the procedure contemplated under "Part XI"
of the Constitution. This leads to the determination, that the
"basic structure" is inviolable. In our view, the same would apply
to all other legislations (other than amendments to the
Constitution) as well, even though the legislati,Pn had been
G enacted by following the prescribed procedure, and was within
the domain of the enacting legislature, any infringement to the
"basic structure" would be unacceptable. Such submissions
advanced at the hands of the learned counsel for the
respondents are, therefore, liable to be disallowed. And are
H accordingly declined ..
MADRAS BAR ASSOCIATION v. UNION OF INDIA 273
[JAGDISH SINGH KHEHAR, J.]
II. Whether the transfer of adjudicatory functions vested in the A
High Court to the NTT violates recognized constitutional
conventions?
Ill. Whetherwhile transferring jurisdiction to a newly created
courUtribunal. it is essential to maintain the standards and the
stature of the court replaced? B
. 66. In addition to the determination on the adjudication of
. the present controversy on the concept of basic structure, the
instant matter calls for a determination on the sustainability of
the NTI Act, from other perspectives ~lso. We shall now advert
to the alternative contentions. First and foremost, it was the C
·submission of the learned counsel for the petitioners, that it is
impermissible for legislature to abrogate/divest the core judicial
appellate functions, specially, the functions traditionally vested
in a superior court, to a quasi judicial authority devoid of
essential ingredients of the superior court. The instant D
submission was premised on the foundation, that such action
is constitutionally impermissible.
67. In order to determine whether or not the appellate
functions which have now been vested with the NTI, constituted E
the core judicial appellate function traditionally vested with the
jurisdictional High Courts, we have recorded under the heading
- "The Historical Perspective", legislative details, pertaining to
the Income Tax Act, the Customs Act and the Excise Act. We
had to do so, for that was the only manner to deal with the
instant aspect of the controversy. A perusal of the historical
F
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 details reveal, that for some time there was a power
of reference, exercisable on "questions of law". The adjudication G
thereof rested with the jurisdictional High Courts. The second
appellate remedy has always been before a quasi-judicial
appellate authority, styled as an Appellate Tribunal. Across the
board, under all the enactments which are relevant for the
present controversy, proceedings before the Appellate Tribunal H
274 SUPREME COURT REPORTS [2014] 10 S.C.R.
A have been legislatively described as "judicial proceedings". It
is, therefore apparent, that right from the beginning, the clear
legislative understanding was, that from the stage of the
proceedings before the Appellate Tribunal, the proceedings
were-of the nature of "judidal proceedings". Again across the
B board, under all the enactments, relevant for the -present
controversy, questions of law were originally left to be
adjudtcated by the jurisdictional High Courts. The reference
jurisdiction, was substituted in all the enactments, and
converted into appellate jurisdiction. The instant appellate
c 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
jurisdictional High Court. Similarly Section 129A of the
Customs Act, 1962, and Section 35G of the Central Excise
Act, 1944, provided for an appellate remedy from the concerned
0
Appellate Tribunal to the High Court. The jurisdictional High
Court would hear appeals on questions of law, against orders
passed by the Appellate Tribunals. It is, therefore apparent, that
right from the beginning, well before the promuigation of the
Constitution, the core judicial appellate functions, for
E adjudication of tax related disputes, were vested with the
jurisdictional High Courts. The High Courts have traditionally,
been exercising the jurisdiction to determine questions of law,
under all the above tax legislations. In this view of the matter, it
is not possible for us to conclude, that it was not justified for
F the learned counsel for the petitioners to contend, that the core
judicial appellate function in tax matters, on questions of law,
has uninterruptedly been vested with the jurisdictional High
Courts.
G 68. Before we proceed with the matter further, it is
necessary to keep in mind the composition of the adjudicatory
authorities which have historically dealfwith the matters arising
out of tax laws. First, we shall deal with the composition of the
Appellate Tribunals. All Appellate Tribunals which are relevant
for the present controversy were essentially comprised of
H Judicial Members, besides Accountant or Technical Members.
., :
MADRAS BAR ASSOCIATION v. UNION OF INDIA 275
[JAGDISH SINGH KHEHAR, J.]
To qualify for appointment as a Judicial Member, it was A
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. It is the above qualification, which enabled the
enactments to provide, by a fiction of law, that all the said
Appellate Tribunals were discharging "judicial proceedings". 8
The next stage of appellate determination, has been
traditionally vested with the High Courts. The income-tax
legislation, the customs legislation, as well as, the central
excLse legislation uniformly provided, that in exercise of its
appellate jurisdiction, the jurisdictional High Court would C
adjudicate appeals arising out of orders passed by the
respective Appellate Tribunals. The said appeals were by a
legislative determination, to be heard 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 · D
adjudicatory role, of the jurisdictional High Cou_rt was
concerned. It would, therefore, not be incorrect to conclude, by
accepting the submissions advanced at the hands of the
learned counsel for the petitioners,, that before and after
promulgation of the Constitution, till the enactment of1he NTT E
Act, all legislative provisions vested the appellate power of -
adjudication, arising out of the Income Tax Act, th_Ef-Customs
Act and the Excise Act, on questions of law, with the,
jurisdictional High Courts.
F
69. Having recorded the above conclusion, the next issue
to be determined is whether the adjudication of the disputes
arising out of the provisions under reference, must remain within
the realm of the jurisdictional High Courts? The instant
proposition has two perspectives. Firstly, whether constitutional
interpretation in the manner accepted the world over (details G
whereof have been narrated by us under the heading - "The
Issues canvassed on behalf of the petitioners", under the sub-
title - "The second contention"), would be a constitutional
mandate, for the appellate jurisdiction pertaining to tax matters,
to remain with the High Court? Secondly, whether the express H
276 SUPREME COURT REPORTS [2014] 10 S.C.R.
A provisions of the Constitution mandate, that tax issues sho1,1ld
be decided by the concerned jurisdictional High Court?
70. We shall first deal with the first perspective, namely,
whether constitutional interpretation in the manner accepted the
world over, would be a constitutional mandate for appellate -
B jurisdiction on tax matters, to remain with the jurisdictional High
Court. Insofar as the instant aspect of the matter is concerned,
reliance was placed on judgments emerging out of the
Constitutions of Jamaica, Ceylon, Australia and Canada,
rendered either by the Privy Council or the highest Courts of
C the concerned countries. The contention of the learned counsel
for the petitioners was, that the constitutions of the above
countries were based on the Westminster model. It was further
pointed out, that the Indian Constitution was also based on the
Westminster model, and that, the instant position stands
D recognized in the judgment rendered by this Court in Union of
India v. Madras Bar Association case (supra). Incidentally, it
may be mentioned that we have extracted paragraph 101 of
the above judgment hereinabove, wherein it is so recorded. It
is accordingly the contention of the learneel counsel for the
E petitioners, that the judgments relied upon by the petitioners on
the instant aspect of the matter, would be fully applicable to the
controversy in hand. Under the constitutional convention,
adverted to in the judgments referred to on behalf of the
petitioners, it was submitted, that judicial power which rested
F with definite courts at the time of enactment of the constitutions
based on the Westminster model, had to remain with the same
courts, even after the constitutions had become effective and
operational. Furthermore, it was submitted, that the judicial
power had to be exercised in the same manner as before, i.e.,
whether by a judge sitting singly, or with other judges. And
G therefore it was asserted, that on constitutional conventions well
recognized the world over, appellate jurisdiction in respect of
tax matters, would have to remain with the jurisdictional High
Courts, and would have to be determined by a bench of at least
two judges of the High Court, as was the position before the
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 277
[JAGDISH SINGH KHEHAR, J.]
enactment of the Constitution, and, as has been the position A
thereafter, till the promulgation of the NTT Act.
71. We have given our thoughtful consideration to the
submission advanced at the hands of the learned counsel for
the petitioners, insofar as the first perspective is concerned. We
B
find substance in the submission advanced at the hands of the
learned counsel for the petitioners, but not exactly in the format
suggested by the learned counsel. A closer examination of the
judgments relied upon lead us to the conclusion, that in every
new constitution, which makes separate provisions for the
legislature, the executive and the judiciary, it is taken as C
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 discharging judicial functions, which was
exercised by members of the higher judiciary, at the time when D
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 judicial power
could be allowed to be exercised by an analogous/similar court/
tribunal, with a different name. However, by virtue of the E
constitutional convention, while constituting the analogous court/
tribunal, it will have to be ensured, that the appointment and
security of tenure of judges of that court would be the same,
as of the court sought to be substituted. This was the express
conclusion drawn in Hinds case (supra). In Hinds case it was F
acknowledged, that Parliament was not precluded from
establishing a court under a new name, to exercise the
jurisdiction that was being exercised by members 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 G
appointed to be members of such a court/tribunal, should be
appointed in the same manner, and should be entitled to the
same security of tenure, as the holder of the judicial office, at
the time when the constitution came into force. Even in the
treatise "Constitutional Law of Canada" by Peter W. Hogg, it H
278 SUPREME COURT REPORTS [2014] 10 S.C.R.
A was observed; if a province invested a tribunal with a jurisdiction
of a kind, which ought to properly belong to a superior, district
or county Court, then that court/tribunal (created in its place),
whatever is its official name, for constitutional purposes has to,
while replacing a superior, district or county Court, satisfy the
B requirements and standards of the substituted court. This would
mean, that the newly constituted court/tribunal will be deemed
to be invalidly constituted, till its members are appointed in the
same manner, and till its members are entitled to the same
conditions of service, as were available to the judges of the
c court sought to be substituted. In the judgments under reference
it has also been concluded, that a breach of the above
constitutional convention could not be excused by good intention
(by which the legislative power had .been exercised, to enact a
given law). We are satisfied, that the aforesaid exposition of
0 law, is in consonance with the position expressed by this Court,
while dealing with the concepts of "separation of powers", the
"rule of law" and "judicial review". In this behalf, reference may
be made to the judgments in L. Chandra Kumar case (supra),
as also, in Union of India v. Madras Bar Association case·
E (supra}. Therein, this Court has recognized, that transfer o{.
jurisdiction is permissible, but in effecting such transfer, the
court to which the power of adjudication is transferred, must be
endured with salient characteristics, which were possessed by
the court from which the adjudicatory power has been
transferred. In recording our conclusions on the submission
F advanced as the first perspective, we may only state, that our
conclusion is exactly the same as was drawn by us while
examining the petitioners' previous submission, namely, that it
is not possible for us to accept, that under recognized
constitutional conventions, judicial power vested in superior
G courts cannot be transferred to coordinate courts/tribunals. The
answer is, that such transfer is permissible. But whenever there
is such transfer, all conventions/customs/practices of the court
sought to be replaced, have to be incorporated in the court/
tribunal created. The newly created court/iribunal would have
H to be established, in consonance with the salient characteristics
MADRAS BAR ASSOCIATION v. UNION OF INDIA 279
[JAGDISH SINGH KHEHAR, J.]
and standards of the court which is sought to be substituted. A
72. Now we shall deal with the second perspective,
namely, whether the provisions of the Indian Constitution itself
mandate, that tax issues at the appellate level, must be heard
by the concerned jurisdictional High Court. Insofar as the instant
8
aspect of the matter is concerned, learned counsel for the
petitioners placed reliance on Articles 50 and 225 of the
Constitution. Article 50 of the Constitution was relied upon to
demonstrate the intent of the framers of the Constitution,
namely, that they wished to ensure the exclusivity and the
separation of the judiciary, from the executive. It is not necessary C
for us to deal with the instant aspect of the matter, for the reason
that, in the judgments rendered by this Court which have been
referred to by us hereinabove, the issue has already been
debated with reference to Article 50 of the Constitution.
D
73. The other provision relied upon by the learned counsel
for tl)e petitioners is Article 225 of the Constitution. The tenor
of the submission advanced by the learned counsel for the
petitioners, has been recorded by us while dealing with the
second contention (advanced on behalf of the petitioners). The
E
same may be adverted to. There can be no doubt whatsoever,
that Article 225 of the Constitution does expressly provide, that
the jurisdiction of existing High Courts and the respective
powers of the judges thereof "shall be the same as immediately
before the commencement of the Constitution". It is also
apparent, that the proviso thereto expressly mandates, "that any
F
restriction to which the exercise of original jurisdiction by any
of the High Courts with respect to any matter concerning the
revenue or concerning any act ordered or done in collection
thereof was subject immediately before the commencement of
the Constitution shall no longer apply to the exercise of such G
jurisdiction". Insofar as the contention emerging out of the
proviso is concerned, it needs to be pointed out, that the same
pertains to "the exercise of original jurisdiction by .any of the
High Ceiurts''. It is, therefore apparent, that the issue in hand,
namely, the appellate jurisdi9tion vested with the jurisdictional H
280 SUPREME COURT REPORTS [2014] 10 S.C.R.
A High Courts, under the provisions of the Income Tax Act, the
Customs Act and the Excise Act, has no bearing to the proviso
under reference. We may therefore conclude by recording, that
the instant submission advanced on behalf of the petitioners,
is not made out from Article 225 of the Constitution.
B
IV. 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?
V. Whether Section 13(1) of the NTT Act insofar as it allows
C Accountants to represent a party to an appeal before the NTT
is valid?
74. We may first take up for consideration, Writ Petition
(Civil) no. 621 of 2007. The same has been filed by members
of the Institute of Company Secretaries of India, seeking the
0
right to appear before the NTT, as representatives of a party
to an appeal. Respondent no. 5 in the said Writ Petition, is the
Institute of Chartered Accountants. It has entered appearance
and canvassed that the claim of Company Secretaries and
E Chartered Accountants is not comparable. While indicating the
permissibility of Chartered Accountants to represent a party to
an appeal before the NTT on account of their special acumen,
their claim is, that this issue raised on behalf of the Company
Secretaries is a matter of policy. And therefore, it would not be
open to this Court to bestow, on account of parity, the right to
F represent a party to an appeal, before the NTT, on Company
Secretaries.
75. While examining the above contention, we will indeed
be dealing with Section 13 of the NTT Act, which has already
G been extracted while recording the submissions advanced on
behalf of the petitioners, with reference to the fourth contention.
A perusal of the said provision reveals, 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
H practitioners, or any person duly authorized by him, to present
MADRAS BAR ASSOCIATION v. UNION OF INDIA 281
[JAGDISH SINGH KHEHAR, J.]
his case before the NTT. The pointed submission advanced on A
behalf of the Institute of Chartered Accountants of India was,
that under Section 13 of the NTT Act, Chartered Accountants
are entitled to appear before the NTT, because of their
recognized acumen. It was submitted, that it is the prerogative
of the legislature and a matter of policy, to determine persons B
who are entitled to appear before the NTT. It was pointed out,
that courts should not ordinarily interfere in such policy matters.
It is therefore, that learned counsel for the Institute of Chartered
Accountants of India, has placed reliance on the decision
rendered by this Court in Delhi Pradesh Registered Medical c
Practitioners v. Director of Health, Delhi Administration
Services, (1997) 11 SCC 687, wherefrom our pointed attention
was invited to the following observations:-
"2. The propriety and validity of the public notice issued
by the Director, Health Services, Delhi Administration D
indicating that the Indian Medicine Central Council had
recognized Ayurveda Ratna and Vaid Visharada degrees
awarded by the Hindi Sahitya Sammelan, Prayag,
Allahabad only up to 1967 and the certificate of Ayurveda
Ratna and Vaid Visharada given by the said organization E
after 1967 not being recognized under the said Act,
registration obtained by any person as a medical
practitioner on the basis of such degrees therefore would
not be recognized and any person having such
qualification would not be entitled to practise in Delhi are F
impugned in these appeals. It was also indicated in the
said public notice that no Indian university or Board
conducts one year's course for giving the bachelor's
degree in Ayurvedic Medicine or through correspondence
course no M.D. Degree in Ayurveda was conferred by any G
university or Board. The public at large was cautioned by
the said public notice published in the newspaper about
such position in law.
)()()( )()()( )()()(
H
- 282 - SUPREME COURT REPORTS [2014] 10 S.C.R.
A 5~ - We are, however, unable to accept such contention
of Mr. Mehta. Sub-section (3) of Section 17 of the Indian
Medicine Central Council Act, 1970, in our view, only
envisages that where before the enactment of the said
Indian Medicine Central Council Act, 1970 on the basis of
B requisite qualification which was then recognized, a person
got himself registered as medical practitioner in the
disciplines contemplated under the said Act or in the
absence of any requirement for registration such person
had been practising for five years or intended to be
c registered and was also entitled to be registered, the right
of such person to practise in the discipline concerned
including the privileges of a registered medical practitioner
stood protected even though such practitioner did not
possess requisite qualification under the said Act of 1970.
D It may be indicated that such view of ours is reflected from
the Objects- and Reasons indicated for introducing sub-
section (3) of Section 17 in the Act. In the Objects and
Reasons; it was mentioned:
"[T]he Committee are of the opinion that the existing
E rights and privileges of practitioners of Indian
Medicine should be given adequate safeguards.
The Committee, in order to achieve this object,
have added three new paragraphs to sub-section
(3) of the clause protecting (1) the rights to practise
F of those practitioners of Indian Medicine who may
not, under the proposed legislation, possess a
recognized qualification subject to the condition that
they are already enrolled on a State Register of
Indian Medicine on the date of commencement of
G this Act, (ii) the privileges conferred on the
practitioners of Indian Medicine enrolled on a State
Register, under any law in force in that State, and
(iii) the right to practise in a State of those
practitioners who have been practising lndian ·
H Medicine in that State for not less than five years
MADRAS BAR ASSOCIATION v. UNION OF INDIA 283
[JAGDISH SINGH KHEHAR, J.]
where r:io register of Indian Medicine was A
maintained earlier."
As it is not the case of any of the writ petitioners that they
had acquired the degree in between 1957 (sic 1967) and
1970 or on the date of enforcement of provisions of 8
Section 17(2) of the said Act and got themselves
registered or acquired right to be registered, there is no
question of getting the protection under sub-section (3) of
Section 17 of the said Act. It is to be stated here that there
is also no challenge as to the validity of the said Central C
Act, 1970. The decision of the Delhi High Court therefore
cannot be assailed by the appellants. We may indicate
here that it has been submitted by Mr. Mehta and also by
Ms. Sona Khan appearing in the appeal arising out of
Special Leave Petition No. 6167 of 1993 that proper
consideration had not been given to the standard of D
education imparted by the said Hindi Sahitya Sammelan,
Prayag and expertise acquired by the holders of the
aforesaid degrees awarded by the said institution. In any
event, when proper medical facilities have not been made
available to a large number of poorer sections of the E
society, the ban imposed on the practitioners like the writ
petitioners rendering useful service to the needy and poor
people was wholly unjustified. It is not necessary for this
Court to consider such submissions because the same
remains in the realm of policy decision of other F
constitutional functionaries. We may· also indicate here that
what constitutes proper education and requisite expertise
for a practitioner in Indian Medicine. must be left to the
proper authority having requisite knowledge in the subject.
As the decision of the Delhi High Court is justified on the G
face ~f legal position flowing from the said Central Act of
1970, we do not think that any interference by this Court
is called for. These appeals therefore are dismissed
without any order as to costs."
H
284 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Reliance was also placed on State of Rajasthan v. Lata Arun,
(2002) 6 sec 252, wherein it was held as under:-
"4. The question which arises for determination in this case
is whether the respondent had the eligibility qualification
for admission in General Nursing and Midwifery and Staff
B
Nurse Course (hereinafter referred :o as "Nursing Course")
commencing in the year 1990. The Director, Medical and
Health Services had invited applications by 15-12-1989
from eligible candidates fo·r admission in the Nursing
_Course to be started from January 1990. It was stated in
c the notification that the candidates should have passed first
year of three years' degree course (TDC) or 10+2; and that
the candidates with Science subjects (Biology, Chemistry,
Physics) will be given preference. During the period, the
Indian Nursing Council had issued a set of Syllabi and
D Regulations for courses in General Nursing and Midwifery
in which the prescribed minimum educational qualification
for all candidates was 12th class-pass or its equivalent
preferably with Science subjects.
E xxx xxx xxx
10. The points involved in the case are twofold: one relating
to prescription of minimum educational qualification for
admission to the course and the other relating to
recognition of the Madhyama Certificate issued by the.
F Hindi Sahitya Sammelan, Allahabad as equivalent to or
higher than +2 or 1st year of TDC for the purpose of
admission. Both these points relate to matters in the realm
of policy decision to be taken by the State Government or
the authority vested with power under any statute. It is not
G for courts to determine whether a particular educational
qualification possessed by a candidate should or should
not be recognized as equivalent to the prescribed
qualification in the case. That is not to say that such matters
are not justiciable. In an appropriate case the court can
H examine whether the policy decision or the administrative
MADRAS BAR ASSOCIATION v. UNION OF INDIA 285
[JAGDISH SINGH KHEHAR, J.]
order dealing with the matter is based on a fcµr, rational A
and reasonable ground; whether the decision has been
taken on consideration of relevant aspects of the matter;
whether exercise of the power is obtained with mala fide
intention; whether the decision serves the purpose of giving
proper training to the candidates admitted or it is based B
on irrelevant and irrational considerations or intended to
benefit an individual or a group of candidates."
76. In addition to the above submissions it was contended,
that the Chartered Accountants are permitted to appear before
a large number of tribunals/fora. Illustratively it was submitted, C
that under Section 288 of the Income Tax Act, 1961, read \('/ith
Rule 50 of the Income Tax Rules, 1962, Chartered Accountants
are permitted to appear in income tax matters. Likewise, it was
asserted that Chartered Accountants are entitled to appear in
Central Excise matters under Section 350 of the Central D
Excise Act, 1944. They are also permitted to appear in matters
arising out of the Customs Act, 1962 (wherefor reliance was
placed on Section 146A of the Customs Act, 1962, read with
Rule 9(a), Customs (Appeals) Rules, 1982). Besides the
aforesaid provisions, it was contended, that Chartered E
Accountants were entitled to appear before various tribunals/
fora under different statutory provisions, such as, under the
Securities and Exchange Board of India Act, 1992, the
Securities Contracts (Regulation) Act, 1956, the Telecom
Regulatory Authority of India Act, 1991, the Companies Act, F
2013, the Company Law Board Regulations, 1991, the
Competition (Amendment) Act, 2007, and the Special
Economic Zone Rules, 2006. We were informed, that Chartered
Accountants were also entitled to appear before the Central
Electricity Regulatory Commission vide Notification dated G
27.8.1999. It was submitted, that if Chartered Accountants are
competent to canvass complicated disputes which arise under
the provisions referred to hereinabove, there should be no
difficulty in allowing them to appear before the NTT, as also,
to consider them eligible for being appointed as Members of H
286 SUPREME COURT REPORTS [2014] 10 S.C.R.
A the NTI. It was therefore asserted, that Section 13 of the NTI
Act rightly permitted Chartered Accountants to represent a party
to an appeal before the NTI. The submission on behalf of the
Institute of Chartered Accountants was, that Company
Secretaries were not comparable with them, and therefore, as
B a matter of policy, they had no legitimate claim for being allowed
to represent a party before the NTI.
77. It is pertinent to record, that during the course of
hearing we had required learned counsel representing the
petftioners, to file a compilation of cases, wherein provisions
C of different laws on diverse subjects had to be taken into
consideration, while deciding tax related disputes. In
compliance, learned counsel have submitted a compilation on
behalf of the Madras Bar Association (in Transferred Case
(Civil) no. 150 of 2006), tabulating by way of illustration, reported
D cases on tax disputes, which also involved provisions of
different laws on different subjects. The compilation brought to
our notice is summarized hereunder:-
I: Hindu Law:
E SI. No Name and Allied subject/law adjudicated
citation of case upon
1 Sri Sri Sridhar -A Hindu idol is a juristic entity
Jiew v. l.T.O. that is given the status of a
(1967) 63 ITR human being capable of
F
192 (Cal) having property and it can be
called an 'individual'.
2 C.E.D. v. Alladi Though a widow cannot be a
Kuppuswamy coparcener, she has
G (1977) 108 ITR copercenary interests and she
439 (SC) is also a member of the
coparcenary by virtue of the
rights conferred by the Hindu
Women's Rights to Property
H Act, 1937.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 287
[JAGDISH SINGH KHEHAR, J.]
3 Narendranath v. There is no distinction between A
C.W.T. (1969) property obtained by a member
74 ITR 190 (SC) of HUF on a partition and the
property that belongs to a
member as a sole surviving
coparcener by right of B
survivorship.
4 Goli Eswariah v. A unilateral declaration of a
C.G.T. (1970) 76 Hindu coparcener, whereby he
ITR 675 (SC) throws his self-acquired
property into the common stock c
of the joint family property,
does not amount to a transfer
and, therefore, such an act
does not constitute a gift.
D
5 C.l.T. v. Sandhya The Supreme Court held that
Rani Dutta (2001) the wife and daughters
248 ITR 201 (SC) inheriting the property of a
male Hindu do not form a HUF
and that they could not also form
E
such family by agreement
among themselves by throwing
their respective inherited
shares in the hotchpot.
6 C.l.T. v. Bharat The gift of property of a HUF to F
Prasad Anshu the members of the family is
Kumar (2001) 249 not void but voidable.
ITR 755 (Delhi)
7 C.W.T. V. M.A.R. Even the fact that the wife had G
Rajkumar (1997) given up her right to
226 ITR 804 (AP) maintenance does not mean
that she is no longer a member
of the family of her husband.
H
288 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 8 C.G.T. v. B.S. The amount spent by a Hindu
Apparao (2001) father on his daughter's
248 ITR 103 (AP) marriage is treated as
maintenance (and not a gift)
under the Hindu Adoptions and
B Maintenance Act, 1956.
9 Gowli Buddanna v. A sole surviving coparcener
C.l.T. 60 ITR 293 can constitute a Hindu
(SC) undivided family.
c 10 C.W.T. v. Chander The separate property of the
Sen 161 ITR 370 father inherited upon intestacy
(SC) by the son is to be treated as
the son's separate property and
not as the property of his joint
D family.
11 C.l.T. v. Radhe If on partition of the family,
Shyam Agrawal separate shares are allotted to
230 ITR 21 the karta, his wife and children,
(Patna) the existence of the Hindu
E
undivided family comes to an
end, and the sllare of the
erstwhile karta becomes his
separate property.
F 12 Kaniram A joint Hindu family, as such,
Hazarimull v. C.l.T. cannot be a partner in a firm.
27 ITR 294 (Cal) However, it may enter into a
partnership through its karta.
G 13 C.l.T. v. Bainik A female member, as a
Industries member of a joint family, can
119 ITR 282 Pat) become a partner in a firm as
the representative of her family.
14 C.G.T. v. Getti Unequal partition amongst
H Chettiar 82 ITR coparceners in a HUF does not
MADRAS BAR ASSOCIATION v. UNION OF INDIA 289
[JAGDISH SINGH KHEHAR, J.]
599 (SC) amount to a gift. A
15 Paramanand In the reunion of a HUF, all
Bajaj v. C.l.T. assets originally partitioned
135 ITR 673(Kar) need not be pooled back.
16 Pushpa Devi v. The scope of the theory of B
C.l.T. 109 ITR blending in Hindu law was
730(SC) discussed in detail.
17 C.l.T. V. B. Gift deed executed by the
Indira Devi assessee in favour of her c
.238 ITR 846 daughter to secure her future
(Ker) after marriage was not due to
any legal obligation enjoined
upon the assessee by virtue of
Section 20 of the Hindu D
Adoptions and Maintenance
Act, but for other
considerations. Therefore, the
gift being voluntary within the
meaning of Section 2(xii) of the E
Gift Tax Act, 1964, was liable to
tax.
18 Sathyaprana Meaning of "coparcenary",
Manjunatha "HUF" and "survivorship"
Gowda v. C.E.D. discussed. F
227 ITR 130 (SC)
19 C.l.T. V. Income from shares held by the
Shakuntala members of HUF cannot be
(1961) 43 ITR termed as the income of HUF. G
352 (SC)
20 C.W.T. v. Late R. Divided member marrying a
Sridharan 104 ITR Christian under Special
436 (SC) Marriage Act, 1956. HUF way
H
290 SUPREME COURT REPORTS (2014] 10 S.C.R.
A of living practiced by divided
member and son - continue to
be HUF - meaning of word
"Hindu" discussed.
II: Company Law:
B
SI. No Name and Allied subject/law adjudicated
citation of case upon
1 C.l.T. v. Light A private company becoming a
Publications Ltd. public company by virtue of the
c (2001) 251 ITR provisions of Section 43A of
0120 (Guj.) the Companies Act, 1956 may
still not become a "company in
which the public are
substantially interested" due to
D the restriction imposed on its
shareholders upon
transferability of its shares to
the other members of the
public.
E
2 C.l.T. v. Sunaero Presumption that a registered
Ltd. (2012) 345 shareholder holds the share in
ITR 0163 (Del) his own right and any claim that
shares were being held as a
nominee has to be proved by
F the person claiming so.
3 Rajasthan Shares of a single type issued
Financial · by a State Financial
Corporation v. Corporation providing for
G C.l.T. 163 ITR minimum and maximum
278(Raj) dividend cannot be termed as
'preference shares'.
4 Bacha F. (i) Partnership is merely an
Guzdar v. C.l.T. association of persons for
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 291
[JAGDISH SINGH KHEHAR, J.1
AIR 1955 SC 74 carrying on the business of A
partnership and, in law, the firm
name is a compendious
method of describing the
partners. Such is, however, not
the case of a company which B
stands as a separate juristic
entity distinct from the
shareholders.
(ii) Shareholders have no right
in the property of the company. c
They are only entitled to
dividends and a share in the
surplus, if any, after the
dissolution of the company.
D
5 Juggilal Kamlapat v. Although company is a
C.l.T. AIR 1969 SC separate legal entity, in
932; C.l.T. v. certain exceptional cases,
Poulose and the Court can lift the
Mathen (Pvt.) Ltd. veil of the corporate entity E
(1999) 236 ITR and have regard to the
416 (Ker) economic realities behind the
legal fayade.
6 C.G.T. v. lndo Valuation of shares-reasonable
Traders & Agencies valuation has to be accepted F
(Madras) Ltd. unless the valuation shocks
131 ITR 313 (Mad) conscience of the court.
7 Vodafone In company law, there is no
International transfer of a share when there G
Holdings BV v. Uol is a transfer of underlying
341 ITR 1 (SC} assets. Various issues of lifting
of the corporate veil discussed.
Also discussed, briefly, the
enforceability of shareholders' H
292 SUPREME COURT REPORTS [2014] 10 S.C.R.
A agreements.
8 C.l.T. v. Suleman A firm of 20 major partners and
Khan and 3 minor partners does not
Mahaboob Khan contravene Section 11 (2) of
and Co. (2002) the Companies Act, 1956
B
257 ITR 0170 (AP) since minors are not to be
reckoned as partners for the
purposes of the calculation.
9 Marshall Sons Amalgamation - date of
c and Co. (India) transfer/ date of amalgamation
Ltd. v. 1.T.O. I transfer is the date specified
(1997) 223 ITR in the scheme as the transfer
809 (SC) date.
D 10 C.l.T. v. Mrs. a) On amalgamation there is an
Grace Collis extinguishment of rights and,
and others therefore, there is a transfer
248 ITR 323(SC) b) The amalgamation scheme
sanctioned by the court would
be an instrument within the
E
meaning of Section 2(1) of the
Bombay Stamp Act, 1958, and
liable for stamp duty. A
document creating or
transferring a right is an
F instrument.
11 Anarkali Redemption of preference
Sarabhai v. C.l.T. shares amounts to transfer and
227 ITR 260(SC) is liable to capital gains.
G
12 C.l.T. v. Artex Gains arising out of slump sale
Manufacturing Co. of business as a going concern
227 ITR 260(SC) is liable to tax under Section
41 (2) on itemized basis if slump
sale is determined on valuation
H
of each asseU liability.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 293
[JAGDISH SINGH KHEHAR, J.]
13 C.l.T. v. Gold Valuation of bonus shares - A
Mohore Investment The correct method to apply in
Company Ltd. cases where bonus shares
(1970) 78 ITR 16 rank pari passu is to take the
(SC) cost of the original shares and
to spread it over all the original B
as well as the bonus shares
and to find out the average
price of all the shares.
14 Hansur Plywood When a shareholder gets a
Works Ltd. v. C.l.T. bonus share the value of the
c
(1998) 229 ITR original share held by him goes
112 (SC) down. In effect, the shareholder
gets two shares instead of the
one share held by him and the
market valu!'l as well as the D
intrinsic value of the two shares
put together will be the same or
nearly the same as the value of
the original share before the
bonus issue. E
15 Shree Gopal Issuance of share takes place
Paper Mills Ltd. when entry of name of
v. C.l.T. (1967) subscriber or successful
64 ITR 233 (Cal) offerer is made in the Register
F
of Members.
16 Dalmia Investment Though no cash is paid by the
Co. Ltd. v. C.l.T. shareholders for allotment of
(1961) 41 ITR 705 the bonus shares, the set-off
(Pat) for dividend which was due to G
be paid to the shareholder out
of undistributed profits of
company can be regarded as
consideration for the bonus
shares. Therefore, real cost of H
294 SUPREME COURT REPORTS (2014) 10 S.C.R.
A bonus shares to shareholder/
assessee is the value of shares
as shown in books of account
of the company.
17 Anarkali Sarabhai Redemption of preference
B
v. C.l.T. 227 ITR shares is "transfer" and liable to
260 (SC) capital gains.
18 C.l.T. v. Artex Gains arising out of "slump
Manufacturing Co. sale" of a business as a going
c 227 ITR 260 (SC) concern is liable to tax under
Section 41 (2) on itemized
basis if the slump sale is
determined on valuation of each
asset/liability.
D
Ill: Mohammedan Law:
SI. No Name and Allied subject/law adjudicated
citation of case upon
E 1 Trustees of A gift was made to the
Sahebzadi Oalia assessee by his father granting
Kuslsum Trust v. him life estate and the
C.E.D. (1998] 233 remainder to his children. Deed
ITR 434 (SC) was held to be void under
Mohammedan law. It was held
F
to be an absolute gift.
2 S.C.M. Principles of Mohammedan law
Mohammed v. regarding gift"analyzed and
C.l.T. [1999] 235 applied - gift with limited
G ITR 75 (Mad) estate not valid in Muslim law -
gift to be that of an entire
property though the document
only gave him a limited right.
3 Ghiasuddin Babu Deferred dower on the
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 295
[JAGDISH SINGH KHEHAR, J.]
Khan v. C.l.T. dissolution of marriage by A
[1985] 153 ITR 707 death or divorce is not a
(AP) contingent debt because one of
the two events is bound to
happen. Wife cannot demand
the payment of deferred dower B
before the event, but husband
can pay even earlier.
4 Ziauddin Ahmed v. A family arrangement is valid
C.G.T. (1976) 102 amongst Muslims.
ITR 253 (Gau) c
5 C.l.T. v. Puthiya A wakf cannot be a partner, but
Ponmanichintakam the mutawal/i of a wakf can be.
Wakf, 44 ITR 172
(SC)
D
6 Ahmed G H Held, the moment a wakf is
Ariff v. C.W.T. created all rights of property
76 ITR 471 (SC) pass out of wakf and vest in the
Almighty - Property is a term of
the widest import and subject to E
any limitation which the context
may require; it signifies every
possible interest which a
person can clearly hold or enjoy.
IV: Family Arrangement: F
SI. No Name and Allied subje~Ulaw adjudicated
citation of case upon
1 C.l.T. v. R. Even if a party to the settlement
Ponnammal had no title but, under th~ family G
(1987) 164 ITR arrangement, the other party
706 (Mad) relinquishes all its claims or
titles in favour of such a person
and acknowledges him to be
the sole owner, then the H
296 SUPREME COURT REPORTS [2014] 10 S.C.R.
A antecedent title must be
assumed and the family
arrangement will be upheld.
2 C.l.T. v. Shanti An asset acquired by way of a
Chandran family arrangement to be
B
(2000) 241 ITR considered as an asset
371 (Mad) acquired on partition or other
succession.
V: Law of Partnership:
c
SI. No Name and Allied subjecUlaw adjudicated
citation of case upon
1 C.l.T. v. Palaniappa Asset of partnership firm-
Enterprises transfer to partner by
D (1998) 234 ITR agreement - not valid -
635 (Mad) registered deed necessary.
2 Saraladevi Contribution of capital by a
Sarabhai v. C.l.T. partner to a firm constitutes
E (2001) 250 ITR 745 "transfer''.
(Guj)
3 Sunil Conversion of an exclusive
Siddharthabhai v. interest into a shared interest
C.l.T. would amount to a "transfer''
F
(1985) 156 ITR and does not amount to a
509 (SC) conveyance by way of sale.
4 C.l.T. v. S. Transaction of a partner with the
Rajamani and firm, during the subsistence of
G Thangarajan the firm requires a registered
Industries instrument, where the
(2000) 241 ITR transaction involves immovable
668 (Mad) property.
-~
5 Malabar Fisheries Distribution of assets on
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 297
[JAGDISH SINGH KHEHAR, J.]
v. C.l.T. dissolution is not transfer bv the A
(1979) 120 ITR 49 firm
(SC)
6 C.l.T. v. GurJta Validity of partnership -
Brothers contribution of partner need not
B
(1981) 131 ITR be cash or property. Skill and '
492 (All) labor would constitute
contribution.
7 C.G.T. v. Pranay Minors who were admitted to
Kr. Saharia the benefits of the partnership c
(1993) 204 ITR could not claim their share of
78 (Gau) goodwill on the reconstruction of
the firm by excluding the minors
and consequently they were not
liable to gift-tax. D
8 Beniram The mere fact that two persons
Moolchand v. take a commission agency
C.l.T. business jointly would not
25 ITR 287 (All) necessarily constitute a
E
partnership between them.
9 C. I. T. v. Chandra If a partnership has been
Shekhar Pawan entered between two persons
Kumar of whom one is a benamidar of
203 ITR 435 the other, there is no relation F
(Raj.) of partnership between the two
persons and one person
cannot constitute a firm.
10 Addi. C.l.T. v. On retirement of a partner from
G
Mohanbhai the firm, there is no transfer of
Pamabhai interest of the partner I the
165 ITR 166 assets thereof including the
(SC) goodwill. The amount received
is no assessable as capital
H
298 SUPREME COURT REPORTS [2014] 10 S.C.R.
A gains. This case law is valid
even after amendment in
Section 45(4) which talks of
dissolution or otherwise
transferred.
B
11 Manohardas It is open to the partners to
Kedarnath v. agree not to take the whole of
C.l.T. the firm's profits for their
25 ITR 287 (All) personal use and to reserve a
part of the firm's profits for
c charity.
12 C.l.T. v. Bharani A partner has no interest in the
Pictures (Mad) property of the firm. In a case
(1981) 129 ITR where there are two partners
D 244 and one signs a release deed
to a property in favour of the
other, it is in fact a transfer from
the partnership to that partner.
VI: Territoriality :
E
SI. No Name and Allied subject/law adjudicated
citation of case upon
1 C.l.T. v. H.E.H. The case involved international
Mir Osman Ali law, municipal law and a
F Bahadur convenantbetweenthe
(1966) 59 ITR Government of India and the
666 (SC) Nizam of Hyderabad. Held, that
Hyderabad State never
acquired an international
G personality under international
law and its ruler was not entitled
to claim immunity from taxation
of his income.
2 Electronics Legislative powers of
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 299
[JAGDISH SINGH KHEHAR, J.]
Corporation of Parliament to enact laws which A
India Ltd. v. C.l.T. have provisions of having extra-
183 ITR 43 (SC) territorial operation, is within
the competence of Parliament.
But nexus with something in
India or object relating to India B
necessary.
3 G.V.K. Industries Parliament is constitutionally
Ltd. v. l.T.O. restricted from enacting
332 ITR 130 (SC) legislation with respect to extra-
territorial aspects or causes
c
that do not have, nor are
expected to have, any direct or
indirect, tangible or intangible,
impact on or effect in or
consequences for (a) the D
territory of India, or any part of
India; or (b) the interests of,
welfare of, well-being of, or
security of inhabitants of India
and Indians. E
4 C.l.T. v. R.D. Business connection - there
Agarwal & Co. must be continuity as well as
56 ITR 20 real and intimate relation
between trading activity carried F
on outside the taxable
territories and trading activity
within the territories, the relation
between the two contributing to
the earning of income by the
G
nonresident in his trading
activity.
VII: Trusts/ Societies:
SI. No Name and Allied subject/law adjudicated H
300 SUPREME COURT REPORTS [2014] 10 S.C.R.
A citation of case upon
1 LR. Patel Family Trustees of a fixed (specific)
Trust v. l.T.O. trust cannot be considered as
262 ITR 520 an association of persons or
(Born) body of individuals.
B
2 C.l.T. v. Thanthi Discussion on the Doctrine of
Trust (1982) 137 Cypres as applicable to public
ITR 735 (Mad) charities.
c 3 C.l.T. v. Swashraya Power of trustees to contract on
286 ITR 265 (Guj) behalf of trust. Consent of
beneficiaries, if necessary.
4 Pandit v. C.l.T. The number of ultimate
(1972) 83 ITR 136 beneficiaries of a trust may
D (Born) increase or decrease by reason
of death and other
circumstances and the interests
of beneficiaries may, at a
relevant date, b~ only
E contingent and may become
vested at much a later date. If at
that date, the beneficiaries can
be ascertained, the Court must
hold that the beneficiaries are
F determinate and known and
that assets are held by the
trustees for their benefit.
5 C.l.T. v. All India A society registered under the
G Hindu Mahasabha Societies Registration Act may
140 ITR 748 (Del) be treated as an association of
persons.
6 Tulsidas India Trust Act, 1882 - trustee
Kilachand v. C.l.T. can also be a beneficiary.
H 42 ITR 1 (SC)
c
MADRAS BAR ASSOCIATION v. UNION OF INDIA 301
[JAGDISH SINGH KHEHAR, J.]
7 C.l.T. v. P. Bhandari Trust may be created in favour A
(1984) 1471TR 500 of an unborn person ifit
(Mad) satisfies conditions laid down in
Section 13 of the Transfer of
Property Act, 1882, even though
coming into existence of such a B
beneficiary is uncertain. A trust
deed cannot be bad for
uncertainty or vagueness.
VIII: Contract Law :
c
SI. No Name and Allied subject/law adjudicated
citation of case upon
1 C.l.T. v. Shantilal Nature of breach - whether
Pvt. Ltd. (1983) payment of damage results in D
144 ITR 57 (SC) . settlement of the original
contract.
2 C.l.T. y. Best & ~ Compensation received on
Co. P. Ltd. termination of agency and
60 ITR 11 (SC) restrictive convenant - nature of E
receipt - revenue or capital -
restrictive convenant - whether
an independent obligation -
whether compensation
'·
severable. F
'
3 N. Sundareswaran Breach of contract - arbitration
v. C.l.T. (1997) clause - scope of Section 73 -
226 ITR 142 (Ker) liquidated and unliquidated
damages - no deduction can G
be cia!fned on potential liability
for damages.
IX: Transfer of Property Act :
SI. No Name and , Allied subject/law adjudicated H
302 SUPREME COURT REPORTS [2014] 10 S.C.R.
A citation of case upon
1 Bansidhar Difference between a sale with
Sewabhogowan a condition to re-purchase and
& Co. v. C.l.T. a mortgage by conditional sale:
(1996) 222 ITR
B 16 (Gau)
2 Jagadishchandran Whether self-created mortgage .
v. C.l.T. or mortgage by previous owner
227 ITR 240 (SC) affects the cost of acquisition.
Arunachalam v.
c C.l.T.
227 ITR 222(SC)
3 C.l.T. v. Brig. Kapil Though a transfer cannot be
Mohan 252 ITR 830 made directly to an unborn
D (Del) person, since under the
definition of "transfer" in Section
5 of the Transfer of Property
Act, 1882, a transfer is limited
to living persons, transfer to an
E unborn person can only be
made by the machinery of
trusts.
4 C.G.T. v. Aloka If two registered documents re-
Lata Sett executed by the same person in
F (1991) 190 ITR respect of the same property to
556 (Cal) two different persons at different
times, the one which was
executed first has priority over
the other, although the former
G was registered subsequent to
the latter. In other words,
registration of a document
relates to the date of its
execution.
H 5 C.l.T. v. N.R. Whether a sale along with deed
MADRAS BAR ASSOCIATION v. UNION OF INDIA 303
[JAGDISH SINGH KHEHAR, J.]
Bhusanraj for re-conveyance of property A
(2002) 256 ITR amounts to transfer under both
0340 (Mad) common law and income-tax
law?
X: Intellectual Property :
B
SI. No Name and Allied subject/law adjudicated
citation of case upon
1 Anantram v. C.l.T. The assignment of a patent is a
5 ITR 511 (Lah) transaction on capital account,
but where a person carries on c
a trade in the buying and selling
of patents or habitually sells his
own patents, or carries on the
vocation of an inventor, the sale
proceeds would be business D
income.
2 Mysore Elect. v. If the owner gets a lump sum or
C.l.T. periodic payment for imp_arting
114 ITR 865 (Kar) the know-how to others, without
substantially reducing its value E
to himself, the payment would
ordinarily be taxable as
business income and the
ground that the exploitation of
the know-how is in the course of F
business and the imparting is
no more than a business
service of however special
kind.
G
3 Janki v. C.l.T. Royalties paid by a licensee for
5 ITC 42 the right to take away earth to
be used for brick making or
extracting saltpeter are income.
The fact that removal of the soil
itself is involved does not make H
304 SUPREME COURT REPORTS [2014) 10 S.C.R.
A the case any different from
cases of royalties on
underground coal and quarries
XI : Interpretation :
B SI. No Name and Allied subjecVlaw adjudicated
citation of case upon
1 Prakash Nath The SC ruled that interpretation
Khanna v. C.l.T. should avoid "the danger of a
(2004) 266 ITR prior determination of the
c 1 (SC) meaning with one's own
preconceived notions" and that
the court interprets the law and
cannot legislate. It referred to
two other principles of
D construction, one relating to
casus omissus and the other
requiring a statute to be read
as a whole.
2 l.T.A.T. vs. V.K. Contempt of court - law
E
Agarwal applicable to ITAT.
235 ITR 175(SC)
3 C.l.T. v. Bhogilal S~es Successionis - Transfer
Mangilal 69 ITR of Property Act dealt with.
F 288 (Guj)
4 Ellerman Lines Discusses the binding nature of
Ltd. V. C.l.T. CBDT's instructions on the
(1971) 82 ITR revenue department.
913 (SC)
G
C.l.T. v. K.P.
Varghese
(1981) 131 ITR
597 (SC)
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 305
[JAGDISH SINGH KHEHAR, J.]
XII :Miscellaneous: A
SI. No Name and Allied subjecUlaw adjudicated
citation of case upon
1 Sree Meenakshi Benami - meaning and effect
Mills v. C.l.T. of taxation in benamidars B
31 ITR 25 (SC) hands discussed.
2 Leo Machado v. Boat belonging to the
C.l.T. assessee met with an accident
172 ITR 744 and sank in high seas; the c
(Mad) compensation received from
insurance cort}pany was due to
destruction of property, thus no
"transfer'' as contemplated by
Section 45 read with Section D
48. The i~surance amount
received cannot be considered
as consideration and amount
received not liable to capital
gains tax.
E
3 Gangadhar Bera A clarificatory notice is a mere
v. Asst. C.l.T. addendum to the original notice
(2004) 190 ITR and the effect of clarification is
467 (Cal) always retrospective so it must
relate to the original notice. A F
mere non-mention of specific
clause does not render notice
bad in law.
4 C.l.T. v. Andhra The expression "charitabl~ G
Chamber of purpose" is very wide in its
Commerce amplitude. The object need not
55 ITR 722 (SC) benefit the whole mankind or
even all persons living in a
particular country or province. It
H
is sufficient if the intention is to
306 SUPREME COURT REPORTS [2014] 10 S.C.R.
A benefit a section of the public
as distinguished from the
specified individuals.
5 Deccan Wine & Explained the difference
General Stores v. between 'association of
B
C.l.T. persons' and 'body of
(1977) 106 ITR individuals'.
111 (AP)
6 C.l.T. v. What constitutes an agricultural
c Maharashtra activity?
Sugar Mills Ltd. There must be cultivation of land
(1971) 82 ITR in the strict sense of the term
452 (Born) meaning thereby tilling the land.
D
7 l.T.O. v. M.K. Income Tax Appellate Tribunal
Mohammed has inherent power to grant stay
Kun hi of collection taxes and
(1968) 71 ITR proceedings.
815 (SC)
E
8 C.l.T. v. Indira Association of persons - when
Balakrishna persons do not combine
(1960) 39 ITR together to produce income,
546 (SC) they cannot be assessed as an
F AOP.
Note - The law has been
amended after 1.4.2002
9 C.l.T. v. H.H. Personal effects of a ruler
Mah~rani Usha (heirloom jewellery) is not
G
Devi taxable upon its sale for a
231 ITR 793 (MP) profit.
10 C.l.T. v. Bai When an person re-values his
Shrinbhai Kocka capital asset and credits his
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 307
[JAGDISH SINGH KHEHAR, J.]
46 ITR 86' (SC) capital account there is no gain A
for the purpose of taxation. One
cannot make loss or profit out of
transactions with himself.
11 Dhakeswari Principles of Natural Justice set 8
Cotton Mills v. out almost for the first time -
C.l.T. locus classicus.
(1954) 26 ITR 775
12 Chemsford Club Principle of mutuality applies to
v. C.l.T. income from property. C
243 ITR 89 (SC)
C.l.T. v. Bankipur
Club Ltd.
226 ITR 97 (SC) D
It is apparent from the compilation extracted hereinabove,
that the Members of the NTI would most definitely 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, E
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 NTI
besides the aforesaid statutes, will not only have to interpret
the provisions of the three statutes, out of which appeals will F
be heard by it, but will also have to examine a challenge to the
vires of statutory amendments made in the said provisions, froin
· time to time. They will also have to determine in some cases,
whether t!Je provisions relied upon had a prospective or
retrospective applicability. G
78. Keeping in mind the fact, that in terms of Section 15
of the NTT Act, the NTT would hear appeals from the Income
Tax Appellate Tribunal and the Customs, Excise and Service
Tax Appellate Tribunal (CESTAT) only on "substantial questions H
308 SUPREME COURT REPORTS [2014] 10 S.C.R.
A of law", it is difficult for us to appreciate the propriety of
representation, on behalf of a party to an appeal, thrqugh either
Chartered Accountants or 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
s law". In our understanding, Chartered Accountants and
Company Secretaries would at best be specialists in
understanding and explaining issues pertaining to accounts.
These issues would, fall purely within the realm of facts. We find
. it difficult to accept the prayer made by the Company
c Secretaries to allow them, to represent a party to an appeal
before the NTT. Even insofar as the Chartered Accountants are
concerned, we are constrained to hold that allowing them to
appear on behalf of a party before the NTT, would be
unacceptable in law. We accordingly reject the claim of
Company Secretaries, to represent a party before the NTT.
0
Accordingly the prayer made by Company Secretaries in Writ
Petition (Civil) no. 621 of 2007 is hereby declined. While
recording the above conclusion, we simultaneously hold Section
13(1 ), insofar as it allows Chartered Accountants to represent
a party to an appeal before the NTT, as unconstitutional and
E unsustainable in law.
VI. The constitutional validity of Sections 5. 6. 7. 8 and 13 of
the NTT Act:
F 79. We shall now endeavour to deal with the validity of
some other individual provisions of the NTT Act, based on the
parameters laid down by constitutional benches of this Court
and on the basis of recognized constitutional conventions
referable to constitutions framed on the Westminster model.
G While dealing with the prayers made in Writ Petition (Civil) no.
621 of 2007, we have already dealt with Section 13 of the NTT
Act, and have held, the same to be partly unconstitutional. We
shall now proceed chronologically, and examine the validity of
Secti9ns 5, 6, 7 and 8 of the NTT Act.
H 80. We shall first examine the validity of Section 5 of the
MADRAS BAR ASSOCIATION v. UNION OF INDIA 309
. [JAGDISH SINGH KHEHAR, J.]
NTT Act. The basis of challenge to the above provision, has A
already been narrated by us while dealing with the submissions
advanced on behalf of the petitioners, with reference to the fourth
contention. According to the learned counsel for the petitioners,
Section 5(2) of the NTT Act mandates, that the NTT would
ordinarily have its sittings in the National Capital Territory of 8
Delhi. According to the petitioners, the aforesaid mandate
would deprive the litigating assessee, the convenience of
approaching the jurisdictional High Court in the State, to which
he belongs. An assessee may belong to a distant/remote
State, in which eventuality, he would not merely have to suffer C
the hardship of traveling a long distance, but such travel would
also entail uncalled for financial expense. Likewise, a litigant
assessee from a far-flung State may find it extremely difficult
and inconvenient to identify an Advocate who would represent
him before the NTT, since the same is mandated to be
ordinarily located in the National .Capital Territory of Delhi. Even D
though we have expressed the view, that 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, we are of the view, that while
vesting jwisdiction in an alternative court/tribunal, it is imperative E
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 NTT Act to the
effect that the sittings of the NTT would ordinarily be conducted F
in the National Capital Territory of Delhi, would render the
remedy inefficacious, and thus unacceptable in law. The instant
aspect of the matter was considered by this Court with reference
to the Administrative Tribunals Act, 1985, in S.P. Sampath
Kumar case (supra) and L. Chandra Kumar case (supra), G
wherein it was held, that permanent benches needed to be
established at the seat of every jurisdictional High Court. And
if that was not possible, at least a circuit bench required to be
established at every place where an aggrieved party could avail
of his remedy. The position on the above issue, is no different H
310 SUPREME COURT REPORTS [2014] 10 S.C.R.
A in the present controversy. For the above reason, Section 5(2)
of the NTT Act is in clear breach of the law declared by this
Court.
81. One needs to also examine sub-sections (2), (3), (4)
and (5) of Section 5 of the NTT Act, with pointed reference to
8 the role of the Central Government in determining the sitting of
benches of the NTT. The Central Government half been
authorized to notify the area in relation to whi.ch each bench
would exercise jurisdiction, to determine the constitution of the
benches, and finally, to exercise the power of transfer of
C 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
D 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. It would be inappropriate for the Central
Government, to have any administrative dealings with the NTI
E or its Members. In the jurisdictional High Courts, such power
is exercised exclusively by the Chief Justice, in the best interest
of the administration of justice. Allowing the Central Government
to participate in the aforestated administrative functioning of the
NTT, in our view, would impinge upon the independence and
F fairness of the Members of the NTI. For the NTI Act to be valid,
the Chairperson and Members of the NTI should be possessed
of the same independence and security, as the judges of the
jurisdictional High Courts (which the NTT is mandated to
substitute). Vesting of the power of determining the jurisdiction,
G and the postings of different Members, with the Central
Government, in our considered view, would undermine the
independence and fairness of the Chairperson and the
Members of the NTT, as they would always be worried to
preserve their jurisdiction based on their preferences/
inclinations in terms of work, and conveniences in terms of
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 311
[JAGDISH SINGH KHEHAR, J.]
place of posting. An unsuitable/disadvantageous Chairperson A
or Member could be easily moved to an insignificant
jurisdiction, or to an inconvenient posting. This could be done
to chastise him, to accept a position he would not: voluntarily
accede to. We are, therefore of the considered Iview, that
Section 5 of the NTT Act is not sustainable in law, as it does 6
not ensure that the alternative adjudicatory authority, is totally
insulated from all forms of interference, pressure or influence
from co-ordinate branches of Government. There is therefore
no alternative, but to hold that sub-sections (2), (3), (4) and (5)
of Section 5 of the NTT Act are unconstitutional.
c
82. We shall now examine the validity of Section 6 of the
NTT Act. The above provision has already been extracted in
an earlier part of this judgment, while dealing with the
submissions advanced on behalf of the petitioners, with
reference to the fourth contention. A perusal of Section 6 D
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, Excise and Service Tax
Appellate Tribunal for at least 5 years. While dealing with the
historical perspective, with reference to the Income Tax E
legislation, the Customs legislation, as also, the Central Excise
legislation, we have noticed the eligibility of those who can be
appointed as Members of the Appellate Tribunals constituted
under the aforesaid legislations. Under the Income Tax Act, a
person who has practiced in accountancy as a Chartered F
Accountant (under the Chartered Accountants Act, 1949) for a
period of 10 years, or has been a Registered Accountant (or
partly a Registered Accountant, and partly a Chartered
Accountant) for a period of 10 years, is eligible to be appointed
as an Accountant Member. Under the Customs Act and the G
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), or equivalent or higher
post, for at least 3 years, is eligible to be appointed as a H
312 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Technical Member. It is apparent from the narration recorded
hereinabove, that persons with the above qualifications, who
were appointed as Accountant Members or Technical Members
in Jhe respective Appellate Tribunals, are also eligible for
appointment as Members of the NTT, subject to their having
8 rendered specified years' service as such. The question to be
determined is, whether persons with the aforesaid
qualifications, satisfy the parameters of law declared by this
Court, to be appointed as, Members of the NTT? And do they
satisfy the recognized constitutional conventions?
c 83. This Court has declared the position in this behalf in
L. Chandra Kumar case (supra) and in Union of India v. Madras
Bar Association case (supra), that Technical Members could
be appointed to the tribunals, where technical expertise is
essential for disposal of matters, and not otherwise. It has also
D been held, that where the adjudicatory process transferred to
a tribunal does not involve any specialized skill, knowledge or
expertise, a provision for appointment of non-Judicial Members
(in addition to, or in substitution of Judicial Members), would
constitute a clear case of delusion and encroachment up_on the
E "independence of judiciary'', and the "rule of law". 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 jurisdiction vested with
F the NTT. That in our view would be a tall order. An arduous and
intimidating asking. 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,
G would be able to discharge such functions. Likewise, it is also
difficult for us to understand how Technical Members, who may
not even possess the qualification of law, or may have no
experience at all in the practice of law, would be able to deal
with "substantial questions of law", for which alone, the NTT has
been constituted.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 313
[JAGDISH SINGH KHEHAR, J.]
84. We have already noticed hereinabove, from data A
placed on record by the learned counsel for the petitioners, that
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 B
Property, Law relating to Intellectual Property, Interpretation of
Statutes/Rules, and other Miscellaneous Provisions of Law.
Besides the above, the Members of the NTT will regularly have
to interpret the provisions of the Income Tax Act, the Customs
Act and the Excise Act. We are of the considered opinion, that C
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.
85. There seems to be no doubt, whatsoever, that the D
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. Constitutional conventions E
in respect of Jamaica, Ceylon, Australia and Canada, on this
aspect of the matter have been delineated above. The opinion
of the Privy Council expressed by Lord Diplock in Hind case
(supra), has been shown as being followed in countries which
have constitutions on the Westminster model. The Indian F
Constitution is one such Constitution. The position has been
clearly recorded while interpreting constitutions framed on the
above model, namely, that even though the legislature can
transfer judicial power from a traditional court, to an analogous
court/tribunal with a different name, the court/tribunal to which G
such power is transferred, should be possessed of the same
salient characteristics, standards and parameters, as the court
the power whereof was being transferred. It is not possible for
us to accept, that Accountant Members and Technical Members
have the stature and qualification possessed by judges of High
Courts. H
314 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 86. It was not disputed, that the NTI has been created to
handle matters which were earlier within the appellate purview
of the jurisdictional High Courts. We are accordingly satisfied,
that the appointment of Accountant Members and Technical
Members of the Appellate Tribunals to the NTT, would be in
B clear violation of the constitutional conventions recognized by
courts, the world over. References on questions of law (under
the three legislative enactments 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
c an appellate remedy (under the three legislative enactments in
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 NTI,
D were being decided by a bench of at least two judges of the
High Court. The onerous and complicated nature of the
adjudicatory process is clear. We may also simultaneously
notice, that the power of "judicial review" vested in the High
Courts under Articles 226 and 227 of the Constitution has not
E been expressly taken away by the NTI Act. During the course
of hearing, we had expressed our opinion in respect of the
power of "judicial review" vested in the High Courts under
Articles 226 and 227 of the Constitution. In our view, the power
stood denuded, on account of the fact that, Section 24 of the
F NTT Act vested with an aggrieved party, a remedy of appeal
against an order passed by the NTT, directly to the Supreme
Court. Section 24 aforementioned is being extracted
hereunder:
G "24. Appeal to Supreme Court.- Any person including any
department of the Government aggrieved by any decision
or order of the National Tax Tribunal may file an appeal to
the Supreme Court within sixty days from the date of
communication of the decision or order of the National Tax
Tribunal to him:
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 315
[JAGDISH SINGH KHEHAR, J.]
Provided that the Supreme Court may, if it is satisfied that A
the appellant was prevented by sufficient cause from filing
the appeal within the said period, allow it to be filed within
such time as it may deem fit."
In view of the aforestated appellate remedy, from an order
8
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. Even
though the learned Attorney General pointed out, that the power
of "judicial review" under Articles 226 and 227 of the C
Constitution had not been taken away, yet he acknowledged,
that there would be implicit limitations where such power would
be exercisable. Therefore, all the more, the composition of the
NTI would have to be on the same parameters as judges of
the High Courts. Since the appointments of the Chairperson/ D
Members of the NTT are not on the parameters expressed
hereinabove, the same are unsustainable under the declared
law. A 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 E
of the NTT is concerned. In the above view of the matter,
Section 6(2)(b) of the NTT Act is liable to be declared
unconstitutional. We declare it to be so.
87. We would now deal with the submissions advanced F
by the learned counsel for the petitioners in respect of Section
7 of the NTI Act. It seems to us, that Section 7 has been styled
in terms of the decision rendered by this Court in L. Chandra
Kumar case (supra). Following the above judgment for
determining the manner of selection of the Chairperson and
Members of the NTT, is obviously a clear misunderstanding of G
the legal position declared by this Court. It should not have been
forgotten, that under the provisions of the Administrative
Tribunals Act, 1985, which came up for consideration in L.
H
316 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Chandra Kumar case (supra), the tribunals constituted under
the said Act, are to act like courts of first instance. All decisions
of the tribunal are amenable to challenge under Articles 226/
227 of the Constitution before, a division bench of the
jurisdictional High Court. In such circumstances it is apparent,
8 that tribunals under the Administrative Tribunals Act, 1985, were
subservient to the jurisdictional High Courts. The manner of
selection, as suggested in L. Chandra Kumar case (supra)
cannot therefore be adopted for a tribunal of the nature as the
NTT. Herein the acknowledged position is, that the NTT has
C been constituted as a replacement of High Courts. The NTI is,
therefore, in the real sense a tribunal substituting the High
Courts. The manner of appointment of Chairperson/Members
to the NTT will have to be, by the same procedure (or by a
similar procedure), to that which is prevalent for appointment
of judges of High Courts. Insofar as the instant aspect of the
0 matter is concerned, the above proposition was declared by
this Court in Union of India v. Madras Bar Association case
(supra), wherein it was held, that the stature of the Members
who would constitute the tribunal, would depend on the
jurisdiction which was being transferred to the tribunal.
E Accordingly, if the jurisdiction of the High Courts is being
transferred to the NTI, 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.
F Including, the tenure of their appointments.
88. 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 NTI,
G Secretaries of Departments of the Central Government. In this
behalf, it would also be pertinent to mention, that 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,
H whereby the Chairperson and Members of the adjudicatory
MADRAS BAR ASSOCIATION v. UNION OF INDIA 317
[JAGDISH SINGH KHEHAR, J.]
body are selected. This would also be violative of the A
recognized constitutional convention recorded by Lord Diplock
in Hinds case (supra), 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 8
attached) and to provide that persons holding the new judicial
offices, should not be appointed in the manner and on the terms
prescrib~d for appointment of Members of the judicature. For
all the reasons recorded hereinabove, we hereby declare
Section 7 of the NTT Act, as unconstitutional.
c
89. Insofar as the validity of Section 8 of the NTI Act is
concerned, it clearly emerges from a perusal thereof, 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. We o
have no hesitation to accept the submissions advanced at the
hands of the learned counsel for the petitioners, that 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 be E
constrained to decide matters, in a manner that would ensure
his reappointment in terms of Section 8 of the NTT Act. His
decisions may or may not be based on his independent
understanding. We are satisfied, that the above provision would
undermine the independence and fairness of the Chairperson F
and Members of the NTT. Since the NTI 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. The reasons for our instant conclusions
are exactly the same as have been expressed by us while dealing
with Section 5 of the NTT Act. We therefore hold, that Section 8 G
of the NTT Act is unconstitutional.
90. Sections 5, 6, 7, 8and13 of the NTI Act have been held
by us (to the extent indicated hereinabove) to be illegal and
unconstitutional on the basis of the parameters laid down by H
318 SUPREME COURT REPORTS [2014] 10 S.C.R.
A decisions of constitutional benches of this Court and on the basis
of recognized constitutional conventions referable to constitutions
framed on the Westminster model. In the absence of the
aforesaid provisions which have been held to be unconstitutional,
the remaining provisions have been rendered otiose and
8 worthless, and as such, the provisions of the NIT Act, as a whole,
are hereby set aside.
Conclusions:
91 (i) The Parliament has the power to enact legislation, and
to vest adjudicatory functions, earlier vested in the High Court,
c with an alternative court/tribunal. Exercise of such power by the
Parliament would not per se violate the "basic structure" of the
Constitution.
(ii) Recognized constitutional conventions pertaining to the
0 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 Parliament would per se not violate any
constitutional convention.
E (iii) The "basic structure" of the Constitution will 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.
F (iv) Constitutional conventions, pertaining to constitutions
styled on the Westminster model, will also stand breached, if
while enacting legislation, pertaining to transfer of judicial power,
conventions and salient characteristics of the court sought to be
replaced, are not incorporated in the court/tribunal sought to be
G created.
(v) The prayer made in Writ Petition (C) No.621 of 2007 is
declined. Company Secretaries are held ineligible, for
representing a party to an appeal before the NTT.
H (vi) Examined on the touchstone of conclusions (iii) and (iv)
MADRAS BAR ASSOCIATION v. UNION OF INDIA 319
above, Sections 5, 6, 7, 8 and 13 of the NTT Act (to the extent A
indicated hereinabove), are held to be unconstitutional. Since
the aforesaid provisions, constitute the edifice of the NTT Act,
and without these provisions the remaining provisions are
rendered ineffective and inconsequential, the entire enactment
is declared unconstitutional. B
R.F.NARIMAN, J. (concurring in the result)
1. In these cases, essentially four contentions have been
urged on behalf of the petitioners. The first contention is that the
reason for setting up a National Tax Tribunal is non-existent as
uniformity of decisions pertaining to tax laws is hardly a reason C
for interposing another tribunal between an appellate Tribunal and
the Supreme Court, as High Court decisions are more or less·
uniform, since they follow the law laid down by each other. Since
this is so, the Act must be struck down. The second contention
is that it is impermissible for the legislature to divest superior D
courts of record from the core judicial function of deciding
substantial questions of law. The third contention is as regards
the Constitutional validity of Article 323-8 being violative of the
separation of powers doctrine, the rule of law doctrine and judicial
review. The fourth contention concerns itself with the nitty gritty E
of the Act, namely, that various sections undermine the
independence of the adjudicatory process and cannot stand
judicial scrutiny in their present form. Since I am accepting the
second contention urged by the petitioners, this judgment will not
deal with any of the other contentions. F
2. "It is emphatically the province and duty of the judicial
department to say what the law is. Those who apply
the rule to particular cases, must of necessity expound
and interpret that rule."
G
What was said over 200 years ago by Chief Justice John
Marshall in the celebrated case of Marbury v. Madison, holds
true even today in every great republican system of Government.
These words take their colour from Alexander Hamilton's
famous federalist Paper No.78 which ran thus: H
320 SUPREME COURT REPORTS [2014] 10 S.C.R.
A "Whoever attentively considers the different
departments of power must perceive, that, in a government
in which they are separated from each other, the judiciary,
from the nature of its functions, will always be the least
dangerous to the political rights of the Constitution; because
B it will be least in a capacity to annoy or injure them. The
Executive not only dispenses the honors, but holds the sword
of the community. The legislature not only commands the
purse, but prescribes the rules by which the duties and rights
of every citizen are to be regulated. The judiciary, on the
contrary, has no influence over either the sword or the purse;
c no direction either of the strength or of the wealth of the society;
and can take no active resolution whatever. It may truly be
said to have neither FORCE nor WILL, but merelyjudgment;
and must ultimately depend upon the aid of the executive
arm even for the efficacy of its judgments.
D
This simple view of the matter suggests several
important consequences. It proves incontestably, that the
judiciary is beyond comparison the weakest of the three
departments of power, that it can never attack with success
E either of the other two; and that all possible care is requisite
to enable it to defend itself against their attacks. It equally
proves, that though individual oppression may now and
then proceed from the courts ofjustice, the general liberty
of the people can never be endangered from that quarter,
I mean so long as the judiciary remains trulv distinct from
F
both the legislature and the Executive. For I agree. that "there
is no libertv. if the power of judging be not separated from
the legislative and executive powers. And it proves, in the
last place, that as liberty can have nothing to fear from the
judiciary alone, but would have everything to fear from its
G
union with either of the other departments; that as all the
effects of such a union must ensue from a dependence of
the former on the latter, notwithstanding a nominal and
apparent separation; that as, from the natural feebleness
of the judiciary, it is in continualjeopardy of being overpowered,
H awed, or influenced by its co-ordinate branches; and that
MADRAS BAR ASSOCIATION v. UNION OF INDIA 321
[R.F. NARIMAN, J.]
as nothing can contribute so much to its firmness and A
independence as permanency in office, this quality may
therefore be justly regarded as an indispensable ingredient
in its constitution, and, in a great measure, as the citadel
of the public justice and the public security." (Emphasis
supplied)
B
3. The precise question arising in these appeals concerns
the constitutional validity of the National Tax Tribunals Act, 2005.
The question raised on behalf of the petitioners is one of great
public importance and has, therefore, been placed before this
Constitution Bench. Following upon the heels of the judgment in C
Union of India v. R.Gandhi, (2010) 11 SCC 1, these matters
were delinked and ordered to be heard separately vide judgment
and order dated 11th May 2010 reported in (2010) 11 SCC 67.
The precise question formulated on behalf of the petitioners is
whether a tribunal can substitute the High Court in its appellate
jurisdiction, when it comes to deciding substantial questions of D
law.
4. Sections 15 and 24 of National Tax Tribunal Act state:
"15. (1) An appeal shall lie to the National Tax Tribunal
from every order passed in appeal by the Income-tax Appellate E
Tribunal and the Customs, Excise and Service Tax appellate
Tribunal, if the National Tax Tribunal is satisfied that the
case involves a substantial question of law.
(2) The Chief Commissioner or the Commissioner of Income-
tax or the Chief Commissioner or Commissioner of Customs F
and Central Excise, as the case may be, or an assessee
aggrived by any order passed by the Income-tax Appellate
Tribunal or any person aggrieved by any order passed by
the Customs, Excise and Service Tax Appellate Tribunal
(hereinafter referred to as aggrieved person), may file an G
appeal to the National Tax Tribunal and such appeal under
this sub-section shall-
(a) be filed within one hundred and twenty days from the
date on which the order appealed against is received by
the assesee or the aggrieved person or the Chief H
322 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Commissioner or Commissioner, as the case may be;
(b) be in the form of a memorandum of appeal precisely
stating therein the substantial question of law involved; and
(c) be accompanied by such fees as may be prescribed:
8 Provided that separate form of memorandum of appeal
shall be filed for matters involving direct and indirect taxes:
Provided fwther that the National Tax Tribunal may entertain
the appeal within sixty days after the expiry of the s?_id period
of one hundred and twenty days, if it is satisfied that the
c appellant was prevented by sufficient cause from preferring
an appeal in time.
(3) Where an appeal is admitted under sub-section (1 ), the
National Tax Tribunal.-
(a) shall formulate the question of law for hearing the appeal;
D and
(b) may alsa determine any relevant issue in connection
with the question so formulated-
(i) which has not been so determined by the Income-tax
E Appellate Tribunal or by the Customs, Excise and Service
Tax Appellate Tribunal or
(ii) which has been wrongly determined by the income-tax
Appellate Tribunal or by the Customs, Excise and Service
Tax Appellate Tribunal, and shall decide the question of
F /aw so formulated and the other relevant issue so determined
and deliver such judgment thereon containing the grounds
on which such decision is founded and may award such
cost as it deems fit.
(4) Where in any appeal under this section, the decision
G of the income-tax Appellate Tribunal or the Customs, Excise
and Service Tax Appellate Tribunal involves the payment
of any tax or duties, the assessee or the aggrieved person,
as the case may be, shall not be allowed to prefer such
appeal unless he deposits at least twenty-five per cent of
H such tax or duty payable on the basis of the order appealed
MADRAS BAR ASSOCIATION v. UNION OF INDIA 323
[R.F. NARIMAN, J.]
against: A
Provided that where in a particular case the National Tax
Tribunal is of the opinion that the deposit of tax or duty under
this sub-section would case undue hardship to such person,
it may dispense with such deposit subject to such conditions
as it may deem fit to impose so as to safeguard the interest B
of revenue.
24. Appeal to Supreme Court.- Any person including any
department of the Government aggrieved by any decision
or order of the National tax Tribunal may file an appeal to
the Supreme Court within sixty days from the date of C
communication of the decision or order of the National Tax
Tribunal to him;
Provided that the Supreme Court may, if it is satisfied that
the appellant was prevented by sufficient cause from filing
the appeal within the said period, allow it to be filed within D
such time as it may deem fit."
5. According to the petitioners, deciding substantial questions
of law, even if they arise from specialized subject matters, would
be a core function of the superior courts of India, and cannot be
usurped by any other forum. To test the validity of this argument, E
we need to go to some constitutional fundamentals.
6. It has been recognized that unlike the U.S. Constitution,
the Constitution of India does not have a rigid separation of powers.
Despite that, the Constitution contains several separate chapters
devoted to each of the three branches of Government. Chapter F
IV of part V deals exclusively with the Union judiciary and Chapter
V of part VI deals with the High Courts in the States.
7. Article 50 of the Constitution states:
"50. Separation ofjudiciary from executive: The State G
shall take steps to separate the judiciary from the executive
in the public services of the State."
8. Art.129 states that the Supreme Court shall be a court of
record and shall have all the powers of such a court including the
power to punish for contempt of itself. Art.131 vests the Supreme H
324 SUPREME COURT REPORTS [2014] 10 S.C.R.
A 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 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
8
cause or matter passed or made by any court or 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) substantial
C questions as to the interpretation of the Constitution of India are
vested exclusively in a bench of at least 5 Hon'ble Judges.
9. Similarly, under Art. 214 High Courts for each State are
established and under Art. 215 like the Supreme Court, High Courts
shall be courts of record and shall have all the powers of such
D courts including the power to punish for contempt. 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
E questions involving interpretation of the constitution are to be
decided by the High Court alone when a court subordinate to it
is seized of such question. Further, the importance of these
provisions is further highlighted by Art. 368 proviso which allows
an amendment of all the aforesaid Articles only if such amendment
F is also ratified by the legislatures of not less than one half of the
States.
10. 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
G errors, Section 115.
11. Art. 227 is of ancient vintage. It has its origins in Section
107 of the Government of India Act 1915 which reads as follows:
"Each of the High Courts has superintendence over all courts
for the time being subject to its appellate jurisdiction, and
H
· MADRAS BAR ASSOCIATION v. UNION OF INDIA 325
[R.F. NARIMAN, J.]
may do any of the following things, that is to say. - A
(a) Call for returns;
(b) Direct the transfer of any suit or appeal from any such
court to any other court of equal or superior jurisdiction;
(c) Make and issue general rules and prescribe forms for B
regulating the practice and proceedings of such courts;
(d) Prescribe forms in which books, entries and accounts
shall be kept by the officers of any such courts; and settle
tables of fees to be allowed to the sheriff, attorneys and all
clerks and officers of courts: C
Provided that such rules, forms and tables shall not be
inconsistent with the provisions of law for the time being
in force, and shall require the previous approval, in the case
of the high court at Calcutta, of the Governor-General in
Council, and in other cases of the local government." D
12. Section 224 of the Government of India Act 1935 more
or less adopted Section 107 of the Act of 1915 with a few changes.
"(1)Every High Court shall have superintendence over all
courts in India for the time being subject to its appellate E
jurisdiction, and may do any of the following thing, that is
to say,-
(a) call for returns;
(b) make and issue general rules and prescribe forms for
regulating the practice and proceedings of such courts; F
(c) prescribe forms in which books, entries and accounts
shall be kept by the officers of any such courts; and
(d) settle tables of fees to be allowed to the sheriff, attorneys,
and all clerks and officers of courts:
G
Provided that such rules, forms and tables shall not be
inconsistent with the provision of any law for the time being
in force, and shall require the previous approval of the
Governor.
(2) Nothing in this section shall be construed as giving to H
326 SUPREME COURT REPORTS [2014] 10 S.C.R.
A a High Court any jurisdiction to question any judgment of
any inferior Court which is not otherwise subject to appeal
or revision."
Article 227 of the Constitution states:
227. Power of superintendence over all courts by the High
8 Court
(1) Every High Court shall have superintendence over all
courts and tribunals throughout the territories in relation
to which it exercises jurisdiction
c (2) Without prejudice to the generality of the foregoing
provisions, the High Court may ·
(a) call for returns from such courts;
(b) make and issue general rules and prescribe forms for
regulating the practice and proceedings of such courts; and
D
(c) prescribe forms in which books, entries and accounts
shall be kept by the officers of any such courts
(3) The High Court may also settle tables of fees to be allowed
to the sheriff and all clerks and officers of such courts and
E to attorneys, advocates and pleaders practising therein:
Provided that any rules made, forms prescribed or tables
settled under clause ( 2 ) or clause ( 3 ) shall not be
inconsistent with the provision of any law for the time being
in force, and shall require the previous approval of the
F Governor
(4) Nothing in this article shall be deemed to confer on a
High Court powers of superintendence over any court or
tribunal constituted by or under any law relating to the Armed
Forces."
G
13. It will be noticed that 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.
14. In Waryam Singh v. Amarnath, 1954 SCR 565, Das,J.
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 327
[R.F. NARIMAN, J.]
stated the High Courts power under Art. 227: A
"This power of superintendence conferred by article 227
is, as pointed out by Harries C.J., in Dalmia Jain Airways
Ltd. v. Sukumar Mukherjee, to be exercised most sparingly
and only in appropriate cases in order to keep the Subordinate
Coutts within the bounds of their authority and not for correcting B
mere errors. As rightly pointed out by the Judicial
Commissioner in the case before us the lower courts in
refusing to make an order for ejectment acted arbitrarily.
The lower courts realized the legal position but in effect
declined to do what was by section 13(2) (i) incumbent on c
them to do and thereby refused to exercise jurisdiction vested
in them by law. It was, therefore, a case which called for
interference by the court of the Judicial Commissioner and
it acted quite properly in doing so." (at 571)
15. It is axiomatic that the superintending power of the High D
Courts under Art. 227 is to keep courts and 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 Court has necessarily to state what the law is by
deciding questions of law, which bind subordinate courts and
tribunals in future cases. Despite the fact that there is no equivalent E
of Art. 141 so far as High Courts are concerned, in East India
Commercial Co. Ltd. Calcutta v. The Collector of Customs,
(1963) 3 SCR 338, Subba Rao, J. stated:
"This raises the question whether an administrative tribunal
can ignore the law declared by the highest court in the State F
and initiate proceedings in direct violation of the law so
declared. Under Art. 215, every High Court shall be a court
of record including the power to punish for contempt of itself.
Under Arl. 226, it has a plenary power to issue orders or
writs for the enforcement of the fundamental rights and for G
any other purpose to any person or authority, including in
appropriate cases any Government, within its territorial
jurisdiction. Under Arl. 227 it has jurisdiction over all courls
and tribunals throughout the territories in relation to which
it exercise jurisdiction. It would be anomalous to suggest H
328 SUPREME COURT REPORTS [2014] 10 S.C.R.
A that a tribunal over which the High Court has superintendant
can ignore the law declared by that court and start proceedings
in direct violation of it. If a tribunal can do so, all the sub-
ordinate courts can equally do so, for there is no specific
provision, just like in the case of Supreme Court, making
the law declared by the High Court binding on subordinate
8
courts. It is implicit in the power of supervision conferred
on a superior tribunal that all the tribunals subject to its
supervision should conform to the law laid down by it. Such
obedience would also be conducive to their smooth working:
otherwise there would be confusion in the administration
c of law and respect for law would irretrievably suffer. We.
therefore. hold that the law declared by the highest court
in the State is binding on authorities or tribunals under its
superintendence. and that they cannot ignore it either in
initiating a proceeding or deciding on the rights involved
D in such a proceeding. "(at 366)
16. The aforesaid analysis shows that 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
obvious that it is emphatically the province of the superior judiciary
E to answer substantial questions of law not only for the case at
hand but also in order to guide subordinate courts and tribunals
in future. That this is the core of the judicial function as outlined
by the constitutional provisions set out above.
17. As to what is a substantial question of law has been decided
F way back in Sir Chunilal V. Mehta v. The Century Spinning
and Manufacturing Co. Ltd., (1962) Suppl. 3 SCR 549 at pages
557-558 thus: ·
" .... The proper test for determining whether a question of
law raised in the case is substantial would, in our opinion,
G be whether it is of general public importance or whether it
directly and substantially affects the rights of the parties
and if so whether it is either an open question in the sense
that it is not finally settled by this Court or by the Privy Council
or by the Federal Court or is not free from difficulty or calls
H · for discussion of alternative views. If the question is settled
MADRAS BAR ASSOCIATION v. UNION OF INDIA 329
[R.F. NARIMAN, J.]
by the highest Court or the general principles to be applied A
in determining the question are well settled and there is a
mere question of applying those principles or that the plea
raised is palpably absurd the question would not be a
substantial question of law."
18. It is clear, therefore, that the decision of a substantial B
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 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 C
questions be decided correctly. Interestingly enough, our attention
has been drawn to various Acts where appeals are on questions
of law/substantial questions of law.
"?i) The Electricity Act, 2003
125. Appeal to Supreme Court - Any person aggrieved by D
any decision or order of the Appellate Tribunal, may, file
an appeal to the Supreme Court within sixty days from the
date of communication of the decision or order of the
Appellate Tribunal to him, on any one or more of the grounds
specified in Section 100 of the Code of Civil Procedure, E
1908 (5of1908):
Provided that the Supreme Court may, if it is satisfied that
the appellant was prevented by sufficient cause from filing
the appeal within the said period, allow it to be filed within
a further period not exceeding sixty days. F
(ii) The National Green Tribunal Act, 2010
Section 22. Appeal to Supreme Court-Any person aggrieved
by any award, decision or order of the tribunal, may, file
an appeal to the Supreme Court, within ninety days from
the date of communication of the award, decision or order G
of Tribunal, to him, on any one or more of the grounds
specified in Section 100 of the Code of Civil Procedure,
1908 (5of1908).
Provided that the Supreme Court, entertain any appeal after H
330 SUPREME COURT REPORTS [2014] 10 S.C.R.
A the expiry of ninety days, if it is satisfied that the appellant
was prevented by sufficient cause from preferring the appeal.
(iii) The Telecom Regulatory Authority of India Act, 1997
Section 18. Appeal to Supreme Court- (1) Notwithstanding
anything contained in the Code of Civil Procedure, 1908
B (5of1908) or in any other law, an appeal shall lie against
any order, not being an interlocutory order, of the Appellate
Tribunal to the Supreme Court on one or more of the grounds
specified in section 100 of that code.
(2) No appeal shall lie against any decision or order made
c by the Appellate Tribunal with the consent of the parties.
(3) Every appeal under this section shall be preferred within
a period of ninety days from the date of the decision or order
appealed against:
D Provided that the Supreme Court may entertain the appeal
after the expiry of the said period of ninety days, if it is satisfied
that the appellant was prevented by sufficient cause from
preferring the appeal in time.
(iv) The Securities ancf Exchange Board of India Act, 1992
E Section 15Z. Appeal to Supreme Court. - Any person
aggrieved by any decision or order of the Securities Appellate
Tribunal may file an appeal to the Supreme Court within
sixty days from the date of communication of the decision
or order of the Securities Appellate Tribunal to him on any
F question of law arising out to such order:
Provided that the Supreme Court may, if it is satisfied that
the applicant was prevented by sufficient cause from filing
the appeal within the said period, allow it to be filed within
a further period not exceeding sixty days.
G
(v) Companies Act, 1956
Section 1OGF. Appeal to Supreme Court. - Any person
aggrieved by any decision or order of the Appellate Tribunal
may file an appeal to the Supreme Court within sixty days
H from the date of communication of the decision or order
MADRAS BAR ASSOCIATION v. UNION OF INDIA 331
[R.F. NARIMAN, J.]
of the Appellate Tribunal to him on any question of/aw arising A
out of such decision or order:
Provided that the Supreme Court may, if it is satisfied that
the appellant was prevented by sufficient cause from filing
the appeal within the said period, allow it to be filed within
a further period not exceeding sixty days." B
19. Whether one looks at the old Section 100 of the Code
of Civil Procedure or Section 100 of the Code of Civil Procedure
as substituted in 1976, the result is that the superior courts alone
are vested with the power to decide questions of law.
Section 100 (Before amendment)
c
"100(1). Save where otherwise expressly provided in the
body of this Code or by any other law for the time being in
force, an appeal shall lie to the High Court from every decree
passed in appeal by any court subordinate to a High Court
0
on any of the following grounds, namely:
(a) the decision being contrary to law or to some usage
having the force of law;
(b) the decision having failed to determine some material
issue of law or usage having the force of law; E
(c) a substantial error or defect in the procedure provided
by this Code or by any other law for the time being in force,
which may possibly have produced error or defect in the
decision of the case upon the merits.
F
(2) An appeal may lie under this section from an appellate
decree passed ex-parte.
Section 100 (After amendment)
100. Second appeal
G
(1) Save as otherwise expressly provided in the body of
this Code or by any other law for the time being in force,
an appeal shall lie to the High Court from every decree
passed in appeal by any Court suboJdina.te to the High Court,
if the High Court is satisfied that the case involves a substantial
question of law. H
332 SUPREME COURT REPORTS [2014] 10 S.C.R.
A (2) An appeal may lie under this section from an appellate
decree passed exparte.
(3) In an appeal under this section, the memorandum of
appeal shall precisely state the substantial question of law
involved in the appeal.
B
(4) Where the High Court is satisfied that a substantial
question of law is involved in any case, it shall formulate
that question.
(5) The appeal shall be heard on the question so formulated
c and the respondent shall, at the hearing of the appeal, be
allowed to argue that the case does not involve such question:
Provided that nothing in this sub-section shall be deemed
to take away or abridge the power of the Court to hear, for
reasons to be recorded, the appeal on any other substantial
D question of law, not formulated by it, if it is satisfied that
the case involves such question."
20. It is obvious that hitherto Parliament has entrusted a superior
court of record with decisions on questions of law/substantial
questions of law. Also, as has been pointed in Khehar, J.'s judgment
E traditionally, such questions were always decided by the High
Courts in the country. The present Act is a departure made for
the first time by Parliament.
21. In this regard, the respondents argued that since taxation
is a specialised subject and there is a complete code laid down
F for deciding this subject, the present impugned Act being part
of that code is constitutionally valid. For this purpose, the respondents
have relied on a passage from the nine Judge Bench in Mafatlal
Industries v. Union of India, (1997) 5 SCC 536 at para 77.
22. This Court in Mafatlal's case was faced with whether
G Kanhaiya Lal Mukundlal Saraf's case, 1959 SCR 1350, has
been correctly decided in so far as it said that where taxes are
paid under a mistake of law, the person paying is entitled to recover
from the State such taxes on establishing the mistake and that
this consequence flows from Section 72 of the Contract Act. In
H answering this question, this Court made an observation that so
MADRAS BAR ASSOCIATION v. UNION OF INDIA ·33·3
[R.F. NARIMAN, J.]
long as an appeal is provided to the Supreme Court from the A
orders of the appellate tribunal, the Act would be constitutionally
valid. This Court while deciding whether Sarafs case was correctly
decided or not, was not faced with the present question at all.
Further, at the time that Mafatlal's case was decided, the scheme
contained in the Central Excise and Salt Act, 1944, required the B
High Court on a statement of case made to it to decide a question
of law arising out of the order of the appellate tribunal, after which
the High Court is to deliver its judgment and send it back to the
appellate tribunal which will then make such orders as are necessary
to dispose of the case in conformity with such judgment. The then C
statutory scheme of the Central Excise and Salt Act, 1944 is
contained in Sections 35G to 35L.
"35G Statement of case to High Court.
(1) The Collector of Central Excise or the other party may,
within sixty days of the date upon which he is served with D
notice of an order under section 35C (not being an order
relating, among other things, to the determination of any
question having a relation to the rate of duty of excise or
to the value of goods for purposes of assessment), by
application in the prescribed form, accompanied, where E
the application is made by the other party, by a fee of two
hundred rupees, require the Appellate Tribunal to refer to
the High Court any question of Jaw arising out of such order
and, subject to the other provisions contained in this section,
the Appellate Tribunal shall, within one hundred and twenty
days of the receipt of such application, draw up a statement F
of the case and refer it to the High Court:
Provided that the Appellate Tribunal may, if it is satisfied
that the applicant was prevented by sufficient cause from
presenting the application within the period hereinbefore
specified, allow it to be presented within a further period G
not exceeding thirty days.
(2) On receipt of notice that an application has been made
under sub- section (1), the person against whom such
application has been made, may, notwithstanding that he H
334 SUPREME COURT REPORTS [2014] 10 S.C.R.
A may not have filed such an application, file, within forty-
five days of the receipt of the notice, a memorandum of
cross- objections verified in the prescribed manner against
any part of the order in relation to which an application for
reference has been made and such memorandum shall
be disposed of by the Appellate Tribunal as if it were an
B
application presented within the time specified in sub- section
(1).
(3) If, on an application made under sub- section (1), the
Appellate Tribunal refuses to state the case on the ground
that no question of law arises, the Collector of Central Excise,
c or, as the case may be, thf# other party may, within six months
from the date on which he is served with notice of such refusal,
apply to the High Court and the High Court may, if it is not
satisfied with the correctness of the decision of the Appellate
Tribunal, require the Appellate Tribunal to state the case
D and to refer it, and on receipt of any such requisition, the
Appellate Tribunal shall state the case and refer it
accordingly.
(4) Where in the exercise of its powers under sub- section
(3), the Appellate Tribunal refuses to state a case which it
E has been required by an applicant to state, the applicant
may, within thirty days from the date on which he receives
notice of such refusal, withdraw his application and, if he
does so, the fee, if any, paid by him shall be refunded.
35H. Statement of case to Supreme court in certain cases.
F If, on an application made under section 35G, the Appellate
Tribunal is of opinion that, on account of conflict in the
decisions of High Courts in respect of any particular question
of law, it is expedient that a reference should be made direct
to the Supreme Court, the Appellate Tribunal may draw
G up a statement of the case and refer it through the President
direct to the Supreme Court.
351. Power of High Court or Supreme Court to require
statement to be amended. If the High Court or the Supreme
Court is not satisfied that the statements in a case referred
H to it are sufficient to enable it to determine the questions
MADRAS BAR ASSOCIATION v. UNION OF INDIA 335
[R.F. NARIMAN, J.]
raised thereby, the Court may refer the case back to the A
Appellate Tribunal, for the purpose of making such additions
thereto or alterations therein as it may direct in that behalf.
35J. Case before High Court to be heard by not less than
two Judges.
B
(1) When any case has been referred to the High Court
under section 35G, it shall be heard by a Bench of not less
than two Judges of the High Court and shall be decided
in accordance with the opinion of such Judges or of the
majority, if any, of such Judges.
c
(2) Where there is no such majority, the Judges shall state
the point of law upon which they differ and the case shall
then be heard upon that point only by one or more of the
other Judges of the High Court, and such point shall be
decided according to the opinion of the majority of the Judges
who have heard the case including those who first heard D
it.
35K. Decision of High Court or Supreme Court on the case
stated.
(1) The High Court or the Supreme Court hearing any such E
case shall decide the questions of law raised therein and
shall deliver its judgment thereon containing the grounds
on which such decision is founded and a copy of the judgment
shall be sent under the seal of the Court and the signature
of the Registrar to the Appellate Tribunal which shall pass F
such orders as are necessary to dispose of the case in
conformity with such judgment.
(2) The costs of any reference to the High Court or the
Supreme Court which shall not include the fee for making
the reference shall be in the discretion of the Court.
G
35L. Appeal to Supreme Court. An appeal shall lie to the
Supreme Court from-
(a) any judgment of the High Court delivered on a reference
made under section 35G in any case which, on its own motion
or on an oral application made by or on behalf of the party H
336 SUPREME COURT REPORTS [2014] 10 S.C.R.
A aggrieved, immediately after the passing of the judgment,
the High Court certifies to be a fit one for appeal to the
Supreme Court; or
(b) any order passed by the Appellate Tribunal relating,
among other things, to the determination of any question
B having a relation to the rate of duty of excise or to the value
of goods for purposes of assessment."
23. It is obvious that the decision of the nine Judge Bench
was only referring to decisions of the appellate tribunal falling under
sub-clause (b) of Section 35L relating to orders passed by the
C Appellate Tribunal on questions having a relation to the rate of
duty of excise or value of goods for the purpose of assessment
and not to appeals from judgments of the High Court delivered
on a reference under Section 35G after the High Court had decided
on a question of law. It is clear, therefore, that the context of Mafatlal's
0 decision was completely different and the decision did not advert
to Sections 35G to 35L as they then stood.
24. Art. 3238 was part of the constitution 42nd Amendment
Act which was, as is well known, an amendment which was rushed
through during the 1975 emergency. Many of its features were
E 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. The 42nd Amendment substituted
the following clause for clause (1) of Art. 227:
"(1) Every High Court shall have superintendence
F over all courts subject to its appellate jurisdiction."
25. A cursory reading of the substituted clause shows that
the old section 107 of the Government of India Act 1915 was brought
back: Tribunals were no longer subject to the High Courts'
superintendence, and subordinate courts were only subject to
G the High Courts' superintendence, if they were also subject to
its appellate jurisdiction. As stated above, the 44th Amendment
undid this and restored sub-clause (1) to its original position.
26. However, Art. 3238 continues as part of the constitution.
The real reason for the insertion of the said article was the same
H as the amendment made to Art. 227 - the removal of the High
MADRAS BAR ASSOCIATION v. UNION OF INDIA 337
[R.F.1NARIMAN, J.]
Courts' supervisory jurisdiction over tribunals. L. Chandra Kumar A
v.Union of India (1997) 3 sec 261, undid the very raison d'etie
of Article 3238 by r~storing the supervisory jurisdiction of the High
Courts so that a reference to Article 3238 would no longer be
necessary as the fegislative competence to make a law relating
to tribunals would in any case be traceable to Entries 77 to79, 8
95 of List I, Entry 65 of List II and Entry 11A and 46 of List Ill of
the 7th Schedule to the Constitution of India.
27. In a significant statement of the law, Chandra Kumar's
judgment, in upholding the vesting of the High Court's original
jurisdiction in a Central Administrative Tribunal, stated thus: c
"The legitimacy of the power of Courts within constitutional
democracies to review legislative action has been questioned
since the time it was first conceived. The Constitution of
India, being alive to such criticism, has, while conferring
such power upon the higherjudiciary, incorporated important o
safeguards. An analysis of the manner in which the Framers
of our Constitution incorporated provisions relating to the
judiciary would indicate that they were very greatly concerned
with securing the independence of the judiciary. These
attempts were directed at ensuring that the judiciary would
be capable of effectively discharging its wide powers ofjuqicial E
review. While the Constitution confers the power to strike
down laws upon the High Courts and the Supreme Court,
it also contains elaborate provisions dealing with the tenure,
salaries, allowances, retirement age of Judges as well as
the mechanism for selecting Judges to the superior courts. F
The inclusion of such elaborate provisions appears to have
been occasioned by the belief that, armed by such provisions,
the superior courts would be insulated from any executive
or legislative attempts to interfere with the making of their
decisions. The Judges of the superior courts have been G
entrusted with the task of upholding the Constitution and
to this end, have been conferred the power to interpret it. It
is they who have to ensure that the balance ofpower envisaged
by the Constitution is maintained and that the legislature
and the executive do not, in the discharge of their functions,
transgress constitutional limitations. It is eauallv their dutv H
338 SUPREME COURT REPORTS [2014] 10 S.C.R.
A to oversee that the judicial decisions rendered by those
who man the subordinate courts and tribunals do not fall
foul of strict standards of legal correctness and judicial
independence. The constitutional safeguards which ensure
the independence of the Judges of the superior judiciary,
are not available to the Judges of the subordinate judiciary
B
or to those who man Tribunals created by ordinary
legislations. Consequently, Judges of the latter category
can never be considered full and effective substitutes for
the superior judiciary in discharging the function of
constitutional interpretation. We, therefore, hold that the
c power of judicial review over legislative action vested in
the High Courts under Articles 226 and in this Court under
Article 32 of the Constitution is an integral and essential
feature of the Constitution, constituting part of its basic
structure. Ordinarily, therefore, the power of High Courts
D and the Supreme Court to test the constitutiooal "validity
of legislations can never be ousted or excluded. (See Para
78)
We also hold that the power vested in the High Courts to
exercise judicial superintendence over the decisions of all
E Courts and Tribunals within their respective jurisdictions
is also part of the basic structure of the Constitution. This
is because ·a situation where the High Courts are divested
of all other judicial functions apart from that of constitutional
interpretation. is equally to be avoided. (See Para 79)
F Before moving on to other aspects, we may summarise
our conclusions on the jurisdictional powers of these
Tribunals. The Tribunals are competent to hear matters
where the vires of statutory provisions are questioned.
However. in discharging this duty. they cannot act as
substitutes for the High Courts and the Supreme Court which
G
have. under our constitutional set-up. been specifically
entrusted with such an obligation. Their function in this
respect is only supplementary and all such decisions of
the Tribunals will be subject to scrutiny before a Division
Bench of the respective High Courts. "(see Para 93)
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 339
[R.F. NARIMAN, J.]
28. The stage is now set for the Attorney General's reliance A
on Union of India v. R. Gandhi (2010) 11 SCC 1.
Various provisions of the Companies Act, 1956 were under
challenge before the Constitution Bench. The effect of these
provisions was to replace the Company Law Board by a Tribunal
vested with original jurisdiction, and to replace the High Court in B
First Appeal with an appellate tribunal. After noticing the difference
between courts and tribunals in paras 38 and 45, the court referred
to the Independence of the judiciary and to the separation of powers
doctrine, as understood in the Indian Constitutional Context in
paras 46 to 57. In a significant statement of the law, the Constitution c
Bench said:
"The Constitution contemplates judicial power being
exercised by both courts and tribunals. Except the powers
and jurisdiction vested in superior courts by the Constitution.
powers andjurisdiction of courts are controlled and regulated o
by legislative enactments. The High Courts are vested with
the jurisdiction to entertain and hear appeals, revisions and
references in pursuance of provisions contained in several
specific legislative enactments. Ifjurisdiction of High Courts
can be created by providing for appeals, revisions and
references to be heard by the High Courts, jurisdiction can E
a/so be taken away by deleting the provisions for appeals,
revisions or references. It also follows that the legislature
has the power to create Tribunals with reference to specific
enactments and confer jurisdiction on them to decide
disputes in regard to matters arising from such special F
enactments. Therefore it cannot be said that legislature
has no power to transfer judicial functions traditionally
performed by courts to Tribunals." (para 87)
In another significant paragraph, the Constitution bench stated:
G
."But when we say that the legislature has the competence
to make laws, providing which disputes will be decided by
courts, and which disputes will be decided by tribunals, it
is subject to constitutional limitations, without encroaching
upon the independence of the judiciary and keeping in view
the principles of the rule of law and separation of powers. H
340 SUPREME COURT REPORTS [2014] 10 S.C.R.
A If tribunals are to be vested with judicial power hitherto vested
in or exercised by courts, such tribunals should possess
the independence, security and capacity associated with
courts. If the tribunals are intended to serve an area which
requires specialized knowledge or expertise, no doubt there
can be technical members in addition to judicial members.
B Where howeverjurisdiction to try certain category of cases
are transferred from courts to tribunals only to expedite the
hearing and disposal or relieve from the rigours of the Evidence
Act and procedural laws, there is obviously no need to have
any non-judicial technical member. In respect of such
c tribunals, only members of the judiciary should be the
Presiding Officers/Members. Typical examples of such
special tribunals are Rent Tribunals, Motor Accidents Claims
Tribunals and Special Courts under several enactments.
Therefore, when transferring the jurisdiction exercised by
D courts to tribunals, which does not involve any specialized
knowledge or expertise in any field and expediting the
disposal and relaxing the procedure is the only object, a
provision for technical members in addition to or in substitution
of judicial members would clearly be a case of dilution of
and encroachment upon the independence of the judiciary
E and the rule of law and would be unconstitutional. "(at para
90)
The Bench then went on to hold that-only certain areas of
litigation can be transferred from courts to tribunals. (see para
F 92)
In paragraphs 101 and 102 the law is stated thus:
"Independent judieial tribunals for determination of
the rights of citizens, and for adjudication of the disputes
and complaints of the citizens, is a necessary concomitant
G of the rule of law. The rule of law has several facets. one of
which is that disputes of citizens will be decided by Judges
who are independent and impartial; and that disputes as
to legality of acts of the Government will be decided by Judges
who are independent of the executive. Another facet of the
rule of law is equality before law. The essence of the equality
H
, MADRAS BAR ASSOCIATION v. UNION OF INDIA 341
[R.F. NARIMAN, J.]
is that it must be capable of being enforced and adjudicated A
by an independent judicial forum. Judicial independence
and separation ofjudicial power from the executive are part
of the common law traditions implicit in a Constitution like
ours which is based on the Westminster model.
The fundamental right to equality before law and equal B
protection of laws guaranteed by Art. 14 of the Constitution,
clearly includes a right to have the person's rights, adjudicated
by a forum which exercises judicial power in an impartial
and independent manner, consistent with the r~~gnized
principles of adjudication. Therefore wherever access to c
courts to enforce such rights is sought to be abridged, altered,
modified or substituted by directing him to approach an
alternative forum, such legislative act is open to challenge
if it violates the right to adjudication by an independent forum.
Therefore, though the challenge by MBA is on the ground
of violation of principles forming part of the basic structure, D
they are relatable to one of more of the express provisions
of the Constitution which gave rise to such principles. Though
the validity of the provisions of a legislative act cannot be
challenged on the ground it violates the basic structure of
the Constitution, it can be challenged as violative of E
constitutional provisions which enshrine the principles of
the rule of law, separation of powers and independence of
the judiciary."
29. Gandhi's case dealt with one specialized tribunal replacing
another specialized tribunal (The Company Law Board) at the F
original stage. It is significant to note that the first appeal provided
to the appellate tribunal is not restricted only to questions of law.
It is a full first appeal as understood in the section 96 CPC sense
- (See section 1OFQ of the Companies Act). A further appeal
is provided to the Supreme Court under Section 1OGF only on G
questions of law. When Gandhi's case states in paragraph 87
that the jurisdiction of the High Courts can be taken away by deleting
provisions for appeals, revisions or references, and that these
functions traditionally performed by courts can be transferred to
tribunals, the court was only dealing with the situation of the High
H
342 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Court being supplanted at the original and first appellate stage
so far as the company 'jurisdiction' is concerned in a situation
where questions of fact have to be determined afresh at the first
appellate stage as well. These observations obviously cannot
be logically extended to cover a situation like the present where
the High Court is being supplanted by a tribunal which would be
B deciding only substantial questions of law.
30. The present case differs from Gandhi's case in a very
fundamental manner. The National Tax Tribunal which replaces
the High Courts in the country replaces them only to decide
C substantial questions of law which relate to taxation. In fact, a Direct
Tax Laws Committee delivered a report in 1978 called the Choksi
Committee after its Chairman. This report had in fact recommended
that a Central Tax Court should be set up. The report stated:
"?11-6.10. In paragraph 11.30 of our Interim Report, we had
expressed the view that the Government should consider
D
the establishment of a Central Tax Court to deal with all
matters arising under the Income-tax Act and other Central
Tax Laws, and had left the matter for consideration in greater
detail in our Final Report. We have since examined the
matter from all aspects.
E
11-6. 11. The problem of tax litigation in India has assumed
staggering proportions in recent years. From the statistics
supplied to us,· it is seen that, as on 30th, June, 1977, there
were as many as 10,500 references under the direct tax
laws pending with the various High Courts, the largest
F pendency being in Bombay, Calcutta, Madras, Karnataka
·and Madhya Pradesh. The number of references made
to the High Courts in India under all the tax laws is of the
order of about 3, 300 in a year, whereas the annual disposals
of such references by all the High Courts put together amount
G to about 600 in a year. In addition to these references, about
750 writ petitions on tax matters are also filed before the
High Courts every year. Under the existing practice of each
High Court having only a single bench for dealing with the
tax matters and that too not all round the year, there is
obviously no likelihood of the problem being brought down
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 343
[R.F. NARIMAN, J.]
to manageable proportions at any time in, the future, but, A
on the other hand, it is likely to become worse. Even writ
petitions seeking urgent remedy against executive action
take several years for disposal. The Wanchoo Committee,
which had considered this problem, recommended the
creation of permanent Tax Benches in High Courts and
8
appointment of retired Judges to such Benches under Article
· 224A of the Constitution to clear the backlog. Although more
than 6 years have passed since that recommendation was
made, the position of arrears in tax matters has shown no
improvement but, on the other hane, it has worsened. In
this connection, it would be worth noting that the Wanchoo C
Committee considered an alternative course for dealing
with this problem through the establishment of a Tax Court
b¢ they desisted from making any recommendation to that
effect us, in their opinion, that would involve extensive
amendments to law and procedures. We have directed our D
attention to this matter in the context of the mounting arrears
of tax cases before the courts.
11-6. 12. The pendency of cases before the courts in tax matters
has also a snow-balling effect all along the line of appellate
hierarchies inasmuch as proceedings in hundreds of cases E
are initiated and kept pending, awaiting the law to be finally
settled by the Supreme Court after prolonged litigation in
some other cases. This obviously adds considerably to
the load of infructuous word in the Department and clutters
up the files of appellate authorities at al/ levels, with adverse
consequences on their efficiency. According to the figures F
supplied to us, out of tax arrears amounting to Rs. 986. 53
crores as on 31st December, 1977, Rs.293.26 crores (30
per cent) were disputed in proceedings before various
appellate authorities and courts.
11-6. 13. Apart from the delays which are inherent in the existing G
system, the jurisdiction pattern of the High Courts also seems
to contribute to the generation of avoidable work. At present,
High Courts are obliged to hear references on matters falling
within their jurisdiction notwithstanding that references on
identical points have been decided by other High Courts. h
344 SUPREME COU~ff REPORTS [2014] 10 S.C.R.
A The decision of one Higi1 Court is not binding on another
High Court even on identical issues. Finality is reached
only when the Supreme Court decides the issue which may
take 10 to 15 years.
11-6. 14. Tax litigation is currently handled by different Benches
B of the High Courts constituted on an ad hoc basis. The
absence of pemwnent benches also accounts for the delay
in the disposal of the tax cases by High Courts.
11-6. 15. The answer to these problems, in our view, is the
establishment of a Central Tax Court with all-India jurisdiction
to deal with such litigation to the exclusion of High Courts.
c Such a step will have several advantages. In the first place,
it would lead to uniformity in decisions and bring a measure
of certainty in tax matters. References involving common
issues can be conveniently consolidated and disposed of
together, thereby accelerating the pace of disposal. Better
D . co-ordination among the benches would make for speedy
disposal of cases and reduce the scope for proliferation
of appeals on the same issues before the lower appellate
authorities, which in its tum will reduce the volume of litigation
going up before the Tax Court as well. Once a Central Tax
E Court is established, the judges appointed to the Benches
thereof will develop the requisite expertise by continuous
working in this field. This would facilitate quicker disposal
of tax matters and would also help in reducing litigation
by ensuring uniformity in decisions.
F 11-6. 16. In the light ofthe foregoing discussions, we recommend
that the Government should take steps for this early
establishment of a Central Tax Court with all-India jurisdiction
to deal exclusively with litigation under the direct Tax laws
in the first instance, with provisions for extending its jurisdiction
to cover all other Central Tax laws, if considered necessary
G in the future. We suggest that such a court should be
constituted under a separate statute. As the implementation
of this recommendation may necessitate amendment of
the constitution, which is likely to take time, we further
recommend that Government may in the meanwhile,
H consider the desirability of constituting special Tax benches
MADRAS BAR ASSOCIATION v. UNION OF INDIA 345
[R.F. NARIMAN, J.]
in the High Courts to deal with the large number of Tax cases A
by continuously sitting throughout the year. The Judges
to b~ appointed to these special benches may be selected
from among those, who have special knowledge and
experience in dealing with matters relating to direct Tax
laws so that, When the Central Tax Court is established at
a later date, these judges could be transferred to that Court. 8
11-6. 17. The Central Tax Court should have Benches located
at important centres. To start with it may have Benches at
the following seven places, viz., Ahmedabad, Bombay,
Calcutta, Delhi, Kanpur, Madras and Nagpur. Each Bench
should consist of two judges. Highly qualified persons should C
be appointed as judges of the Central Tax Court, from among
persons who are High Court judges or who are eligible to
be appointed as High Courtjudges. In the matter of conditions
of service, scales or pay and other privileges, judges of
the Central Tax Court should be on par with the High Court D
judges.
11-6. 18. The Supreme Court and, following it, the High Courts
have held that the Tribunal and the tax authorities, being
creatures of the Act cannot pronounce on the constitutional
validity or vires of any.provision of the Act; that; therefore, E
such a question cannot arise out of the order of the Tribunal
and cannot be made the subject matt~r of a referen.ce to
the High Court and a subsequent appeal to the Supreme
court; and that such a question of validity or vires can be
raised only in a suit or a writ petition. While an income-tax F
authority or the Tribunal cannot decide upon the validity
or vires of the other provisions of the law. We recbmmend
that the powers of the Central Tax Court in this regard should
be clarified in the law itself by specifically giving it the right
to go into questions of validity of the provisions of the Tax
Laws or of the rules framed thereunder. G
11-6. 19. Another important matter, in which we consider that
the present position needs improvement, is the nature of
the Court's jurisdiction in tax matters. Under the present
law, the High Court's jurisdiction in such matters is merely
H
346 SUPREME COURT REPORTS [2014] 10 S.C.R.
A advisory on questions of law. For this purpose, the Appellate
Tribunal has to draw up a statement of the case and refer
the same to the High Court for its opinion. After the High
Court delivers its judgment on the reference, the matter
goes back to the Tribunal, which has then to pass such orders
as are necessary to dispose of the case conformably to
B such judgment. Under this procedure, the aggrieved party
before the Tribunal has to file an application seeking a
reference to the High Court on specified questions of law
arising out bf the Tribunal's order. The hearing of such
application by the Tribunal, followed by the drawing up of
c the statement of the case to the High Court, delays the
consideration of the issue by the High Court for a considerable
time. Where the Tribunal refuses to state the case as sought
by the applicant, then again, the law provides for a direct
approach to the High Court for issue of directions to the
Appellate Tribunal to state the case to the High Court on
D
the relevant question of law. This process also delays the
consideration of the matter by the High court for quite some
time. In addition to these types of delay, there will be further
delays after the High Court decides the matter, as the Tribunal
has to pass consequential orders disposing of the case,
E before the relief, if any due, can be granted to the assessee.
11-6. 20. In our view, the disposal of tax litigation can be speeded
up considerably by vesting jurisdiction in the proposed Central
Tax Court to hear appeals against the orders of the Tribunal
on questions of law arising out of such orders. We,
F accordingly, recommend that the jurisdiction of the Central
Tax Court should be Appellate and not advisory. We also
recommend that appeals before the Central Tax Court should
be heard by a Bench of two judges. The judgment of a division
Bench should be binding on other division Benches of the
G Tax Court unless it is contrary to a decision of the Supreme
Court or of a full Bench of the Tax Court.
11-6. 21. In the matter of appeals before the Central Tax Court,
it would be necessary to make a special provision for enabling
Chartered Accountants to appear on behalf of appellants
H or resoondents to araue the annARl.c; hAfnrP. it I P.nRI
MADRAS BAR ASSOCIATION v. UNION OF INDIA 347
[R.F. NARIMAN, J.]
practitioners would, in any event, be entitled to appear before A
the Central Tax Court. In addition, any other person, who
may be permitted by the Court to appear before it, may
also represent the appellant or the respondent in tax matters.
11-6.22. Our recommendation for setting up ofa Central Tax
Court may not be interpreted to be only a modified version B
of the concept of administrative and other tribunals authorized
to be set up for various purposes under the amendments
effected by the 42nd Amendment of the Constitution. The
Central Tax Court, which we have in view, will be a special
kind of High court with functional jurisdiction over tax matters C
and enjoying judicial independence in the same manner
as the High Courts. The controversy generated by the 42nd
Amendment to the Constitution should not, therefore, be
held to militate against the proposal for the establishment
of a Central Tax Court to exercise the functions of a High
Court in tax matters." D
This recommendation was not acceded to by Parliament.
31. It is obvious, that substantial questions of law which relate
to taxation would also involve many areas of civil and criminal
law, for example Hindu Joint Family Law, partnership, sale of goods, E
contracts, Mohammedan Law, Company Law, Law relating to
Trusts and Societies, Transfer of Property, Law relating to Intellectual
Property, Interpretation of Statutes and sections dealing with
prosecution foroffences. 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 have under our constitutional scheme F
to be decided by the superior courts and the superior courts alone.
Indeed, one of the objects for enacting the National Tax Tribunals
Act, as stated by the Minister on the floor of the House, is that
the National Tax Tribunal can lay down the law for the whole of
India which then would bind all other authorities and tribunals. This G
is a direct encroachment on the High Courts' power under Art.
227 to decide substantial questions of law which would bind all
tribunals vide East India Commercial Co. case, supra.
32. In fact, it is a little surprising that the National Tax Tribunal
is interposed between the appellate Tribunal and the S~preme H
348 SUPREME COURT REPORTS [2014] 10 S.C.R.
A Court for the very good reason that ultimately it will only be the
Supreme Court that will declare the law to be followed in future.
As the appellate tribunal is already a second appellate court, it
would be wholly unnecessary to have a National Tax Tribunal decide
substantial questions of law in case of conflicting decisions of
High Courts and Appellate Tribunals as these would ultimately
8 be decided by the Supreme Court itself, which decision would
under Article 141 be binding on all tax authorities and tribunals.
Secondly, in all tax matters, the State is invariably a party and
the High Court is ideally situated to decide substantial questions
of law which arise between the .State and private persons, being
C constitutionally completely independent of executive control. The
same cannot be said of tribunals which, as L. Chandra Kumar
states, will have to be under a nodal ministry as tribunals are not
under the supervisory jurisdiction of the High Courts.
33. Indeed, other constitutions which are based on the
D Westminster model, like the British North America Act which governs
Canada have held likewise. In Attorney General for Quebec
v. Farrah (1978), Vol.86 DLR [3d] 161 a transport tribunal was
given appellate jurisdiction overthe Quebec Transport Commission.
The tribunal performed no function other than deciding questions
E. of law. Since this function was ultimately performed only by superior
courts, the impugned section was held to be unconstitutional. This
judgment was followed in Re. Residential Tenancies Act, 123
DLR (3d) 554. This judgment went further, and struck down the
Residential Tenancy Act which established a tribunal to require
landlords and tenants to comply with the obligations imposed under
F the Act. The court held:
"The Court of Appeal delivered a careful and scholarly
unanimous judgment in which each of these questions was
answered in the negative. The Court concluded it was not
within the legislative authority of Ontario to empower the
G Residential Tenancy Commission to make eviction orders
and compliance orders as provided in the Residential
Tenancies Act, 1979. The imporlance of the issue is reflected
in the fact that five Judges of the Coult, including the Chief
Justice and Associate Chief Justice, sat on the appeal."
H
MADRAS BAR ASSOCIATION v. UNION OF INDIA 349
[R.F. NARIMAN, J.]
It then went on to enunciate a three steps test with which we A
are not directly concerned. The Court finally concluded:
"Implicit throughout the argument advanced on behalf of
the Attorney-General of Ontario is the assumption that the
Court system is too cumbersome, too expensive and
therefore unable to respond properly to the social needs B
which the residential Tenancies Act, 1979 is intended to
meet. All statutes respond to social needs. Tile Courts are
unfamiliar with equity and the concept of fairness, justice,
convenience, reasonableness. Since the enactment in 1976
o( the legislation assuring "security of tenure" the Country C
Court Judges of Ontario have been dealing with matters
arising out of that legislation, apparently with reasonable
dispatch, as· both landlords and terrants in the present
proceedings have spoken clearly against transfer of
jurisdiction in respect of eviction and compliance orders
from the Courts to a special commission. It is perhaps a/so D
of interest that there is no suggestion in the material filed
with us that the Law Reforms Commission favoured removal
from the Courts of the historic functions performed for over
100 years by the Courts.
I am neither unaware of, nor unsympathetic to, the E
arguments advanced in support of a view thats. 96 should
not be interpreted so as to thwart or unduly restrict the future
growth of provincial administrative tribunals. Yet, however
worthy the policy objectives, must be recognized that we,
as a Court, are not given the freedom to choose whether F
the problem is such that provincial, rather than federal,
authority should deal with 'it. We must seek to give effect
to the Constitution as we understand it and with due regard
for the manner in which it has been judicially interpreted
in the past. If the impugned power is violative of S; 96 it must G
be struck down."
34. In Hins v. The Queen Director of Public Prosecutions
v Jackson Attorney General of Jamaica (intervener) 1976
(1) All ER 353, the Privy Council had to decide a matter under
the Jamaican Constitution. A Gun Courts Act, 1974 was passed H
350 SUPREME COURT REPORTS [2014] 10 S.C.R.
A by the Jamaican Parliament in which it set up various courts. A
question similar to the question posed in the instant case was
decided thus:
"All constitutions on the Westminister model deal under
separate chapter heading with the legislature, the executive
B and the judicature. The chapter dealing with the judicature
invariably contains provisions dealing with the method of
appointment and security of tenure of the members of the
judiciary which are designed to assure to them a degree of
independence from the other two branches of government.
It may, as in the case of Constitution of Ceylon, contain nothing
c more. To the extent to which the constitution itself is silent
as to the distribution of the plenitude of judicial power between
various courts it is implicit that it shall continue to be distributed
between and exercised by the courts that were already in
existence when the new constitution came into force; but the
D legislature, in exercise of its power to make laws for the 'peace,
order and good government of the state, may provide for
the establishment of new courts and for the transfer to them
of the whole or part of the jurisdiction previously exercisable
by an existing court. What, however, is implicit in the very
E structure of a constitution on the Westminister model is that
judicial power, however it be distributed from time to time
between various courts, is to continue to be vested in persons
appointed to hold judicial office in the manner and on the
terms laid down in the chapter dealing with the judicature,
even though this not expressly stated in the constitution
F (Liyanage v. R [1966] All ER 650 at 658 [1976] AC 259 at
287, 288]
The more recent constitutions on the Westminister model,
unlike their earlier prototypes, include a chapter dealing with
fundamental rights and freedoms. The provisions of this chapter
G
form part of the substantive law of the state and until amended
by whatever special procedure is laid down in the constitution
for this purpose, impose a fetter on the exercise by the
legislature, the executive and the judiciary of the plenitude
of their respective powers. The remaining chapters of the
H constitution-. are nrimarilv c.oncern~d not with the leqislature
MADRAS BAR ASSOCIATION v. UNION OF INDIA 351
[RF. Nf\RIMAN, J.]
'
the executive and the judicatures as abstractions, but with A
the persons who shall be entitled collectively or individually
to exercise the plenitude of legislative, executive or judicial
powers-their qualifications for legislative, executive or judicial
office, the method of selecting them, their tenure of office,
the procedure to be followed where powers are conferred B
on a class of persons acting collectively and the majorities
required for the exercise of these powers. Thus, where a
constitution on the Westminister model speaks of a particular
'court' already in existence when the constitution comes into
force, it uses this expression as a collective description of
all those individual judges who, whether sitting alone or with C
other judges orwith a jury, are entitled to exercise the jurisdiction
exercised by that court before the constitution came into force.
Any express provision in the constitution for the appointment
or security of tenure of judges of that court will apply to all
individual judges subsequently appointed to exercise an D
analogous jurisdiction, whatever other name may be given
to the 'court' in which they sit (Attorney General for Ontario
v. attorney General for Canada.)
Where, under a constitution on the Westminister model,
a law is made by the parliament which purports to confer E
jurisdiction on a court described by a new name, the question
whether the law conflicts with the provisions of the constitution
dealing with the exercise of the judicial power does not depend
on the label (in the instant case 'The Gun Court') which the
parliament attaches to the judges when exercising the F
jurisdiction conferred on them by the law whose constitutionality
is impugned. It is the substance of the law that must be regcirded,
not the form. What is the nature of the jurisdiction to be exercised
by the judges who are to compose the court to which the new
labs! is attached? Does the method of their appointment and
the security of their tenure conform· to the requirements of G
the constitution applicable to judges who, at the time the
constitution came into force, exercised jurisdiction of that
nature? (Attorney General for Australia v. Rand Boilermakers'
Society of Australia)."
35. Ultimately, a majority of the court found that the provisions H
352 SUPREME COURT REPORTS [2014] 10 S.C.R.
A of the 1974 Act, in so far as they provide for the establishment
of a full court division of the Gun Court consisting of three resident
Magistrates were unconstitutional.
36. It was also argued by the learned Attorney General that
the High Courts' jurisdiction under Section 260A of the Income
B Tax Act and other similar tax laws could be taken away by ordinary
law and such sections could be deleted. If that is so surely the
jurisdiction vested in the High Court by the said section can be
transferred to another body.
37. It is well settled that an appeal is a creature of statute
C and can be done away by statute. The question posed here is
completely different and the answer to that question is fundamental
to our jurisprudence: that a jurisdiction to decide substantial questions
of law vests under our constitution, only with the High Courts and
the Supreme Court, and cannot be vested in any other body as
a core constitutional value would be impaired thereby.
0
38. In fact, the Attorney General in his written argument at
paras 16 and 21(a) has stated before us:
"16. It is submitted that the present Act does not take away
the power ofjudicial superintendence of the High Court under
E Article 227. Direct appeal to the Supreme Court from the ·
decisions of a tribunal of first instance is an acceptable form
of judicial scrutiny. Provision for direct appeal to Supreme
Court from the decision of a tribunal can be purely on
questions of law as well. Since the High Court as a rule
F does not exercise its power ofjudicial superintendence when·
an appeal is provided to the Supreme Court, the power of .
judicial superintendence of the High Court over the tribunal
stands curtailed in such cases as well. But this curtailment
does not violate the rule of/aw as a court of/aw i.e. the Supreme
Court continues to be the final interpreter of the law. By the
G same analogy a decision of an appellate tribunal with
unrestricted right of appeal to the Supreme Court will not
curtail the power of High Court under 227 as recourse to
the High Court under Articles 2261227 would still be available
ifthetribunal exceeds its jurisdiction or violates the principles
H of natural justice or commits such other transgressions.
MADRAS BAR ASSOCIATION v. UNION OF INDIA 353
[R.F. NARIMAN, J.]
21. (a) The present Act provides ample scope for judicial A
scrutiny in the form of an Appeal under Section 24 of the
Act and also under Articles 2261227, Article 32 and Article
136 of the Constitution."
39. On reading the above argument, it is clear that even
according to this argument, the High Court's power of judicial B
review under Articles 226/227 has in fact been supplanted by
the National Tax Tribunal, something which L. Chandrakumar said
cannot be done. See Para 93 of L. Chandra Kumar's case quoted
above. In State of West Bengal v. Committee for Protection of
Democratic Rights, 2010 (3) SCC 571, a Constitution Bench of C
this Court held:
"39. It is trite that in the constitutional scheme adopted in
India, besides supremacy of the Constitution, the separation
of powers between the legislature, the executive and the
judiciary constitutes the basic features of the Constitution. D
In fact, the importance of separation of powers in our system
of governance was recognised in Special Reference No.
1 of 1964 [AIR 1965 SC 745: (1965) 1 SCR 413]., even
before the basic structure doctrine came to be propounded
in the celebrated case of Kesavananda Bharati v. State of
Kera/a [(1973) 4 SCC 225], wherein while finding certain E
basic features of the Constitution, it was opined that separation
of powers is part of the basic structure of the Constitution.
Later, similar view was echoed in Indira Nehru Gandhi v. Raj
Narain [1975 Supp sec 1] and in a series of other cases
on the point. Nevertheless, apart from the fact that our F
Constitution does not envisage a rigid and strict separation
of powers between the said three organs of the State, the
power ofjudicial review stands entirely on a different pedestal.
Being itself part of the basic structure of the Constitution,
it cannot be ousted or abridged by even a constitutional G
amendment. (See L. Chandra Kumar v. Union of/ndia [(1997)
3 SCC 261 : 1997 SCC (L&S) 577].) Besides, judicial review
is otherwise essential for resolving the disputes regarding
the limits of constitutional power ai7d entering the constitutional
limitations as an ultimate interpreter of the Constitution."
H
354 SUPREME COURT REPORTS [2014] 10 S.C.R.
A "68. Thus, having examined the rival contentions in the context
of the constitutional scheme, we conclude as follows:
(iii) In view of the constitutional scheme and the jurisdiction
conferred on this Court under Article 32 and on the High Courts
under Article 226 of the Constitution the power of judicial
B review being an integral part of the basic structure of the
Constitution, no Act of Parliament can exclude or curtail the
powers of the constitutional courts with regard to the
enforcement of fundamental rights. As a matter of fact, such
a power is essential to give practicable content to the objectives
of the Constitution embodied in Part Ill and other parts of
c the Constitution. Moreover, in a federal constitution, the
distribution of legislative powers between Parliament and
the State Legislature involves limitation on legislative powers
and, therefore, this requires an authority other than Parliament
to ascertain whether such limitations are transgressed. Judicial
D review acts as the final arbiter not only to give effect to the
distribution of legislative powers between Parliament and
the State Legislatures. it is also necessary to show any
transgression by each entity. Therefore, to borrow the words
of Lord Steyn, judicial review is justified by combination of
E "the principles of separation of powers, rule of law, the principle
of constitutionality and the reach of judicial review."
40. In Proprietary Articles Trades Association v. Attorney
General for Canada, 1931 AC 311, Lord Atkin said:
"Their Lordships entertain no doubt that time alone will not
F validate an Act which when challenged is found to be ultra
vires; nor will a history of a gradual series of advances till
this boundary is finally crossed avail to protect the ultimate
encroachment." At Pg 317.
41. Chandra Kumar and R. Gandhi have allowed tribunalization
G at the original stage subject to certain safeguards. The boundary
has finally been crossed in this case. I would, therefore, hold that
the National Tax Tribunals Act is unconstitutional, being the ultimate
encroachment on the exclusive domain of the superior Courts
of Record in India.
H Devika Gujral Matters disposed of.
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