NCLT and NTT: Questions of “Intrinsic Judicial Functions”

Recently, a Constitution Bench of the Supreme Court (headed by Balakrishnan C.J.) finished hearing arguments on the constitutionality of the proposed National Company Law Tribunal (NCLT), and judgment has been reserved. The matter arose out of an appeal against a Madras High Court decision in R. Gandhi v. Union of India.

The principal challenge to the constitutionality of the NCLT is based on the wholesale transfer of jurisdiction of the High Court in company matters to a quasi-judicial tribunal. It was argued by the petitioners that this transfer resulted in the vesting of intrinsic judicial functions in a quasi-judicial/executive body. Jaisimha Babu J. of the Madras High Court had accepted this contention, holding that the power of the Parliament to create Tribunals does not “extend to rendering such new forums an extension of the legislative or executive branches of the Government, or as forums controlled, or designed to be dominated, or potentially dominated, by the legislative or executive wing of the state…” It was held that the proposed model of the NCLT violated the constitutional principles of separation of powers and independence of the judiciary by vesting essential judicial functions in a non-judicial body.

The challenge to the proposed National Tax Tribunal (NTT) also proceeds on rather similar grounds. This issue is also pending before the Supreme Court. In the case of the NTT, the jurisdiction of the High Courts under sections like Section 260-A of the Income Tax Act (which deals with appeals on “substantial questions of law”) is proposed to be given to the NTT.

The objections to “tribunalisation” are not so much due to the fact that the jurisdiction of the High Courts has been taken away; but because the jurisdiction to decide important legal issues has been given to a quasi-judicial tribunal which does not possess the characteristics of the judiciary in terms of composition, appointment, qualifications etc. Perhaps, the best way to solve problems relating to high pendency of cases in the High Courts would be to transfer the cases to institutions which (whatever they may be labeled as – ‘tribunals’ or ‘Courts’) remain intrinsically and in substance ‘judicial’ in nature. Transferring jurisdiction wholesale to quasi-judicial bodies is only likely to compound the problem.

For instance, the Benches of the ITAT (whose determination of facts in taxation matters is ordinarily conclusive) are composed of one judicial member and one accountant member. An appeal lies from the ITAT to the High Court only on a substantial question of law. In hearing that appeal on the question of law, it is not a fact-finding but an intrinsically judicial function which must be performed. It might be argued on this basis that a body similar to a Bench of the High Court (for instance, two judicial members qualified to be High Court judges; rather than the same structure of one judicial and one accountant member) is required. Additionally, the security of tenure of the members ought to be the same as the security of tenure of High Court judges.

It remains to be seen whether the Constitution Bench is convinced by the arguments and actually strikes down the creation of either the NTT or the NCLT for violation of the doctrines of separation of powers and independence of the judiciary.

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Mihir Naniwadekar

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