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“  REPORTABLE”   

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL/APPELLATE JURISDICTION TRANSFERRED CASE (C) NO. 150 OF 2006

Madras Bar Association …Petitioner(s)

versus

Union of India and another …Respondents

WITH

CIVIL APPEAL NO. 3850 OF 2006

CIVIL APPEAL NO. 3862 OF 2006

CIVIL APPEAL NO. 3881 OF 2006

CIVIL APPEAL NO. 3882 OF 2006

CIVIL APPEAL NO. 4051 OF 2006

CIVIL APPEAL NO. 4052 OF 2006

WRIT PETITION (C)  NO.621 OF 2007

TRANSFERRED CASE (C)  NO.116 OF 2006

TRANSFERRED CASE (C)  NO.117 OF 2006

TRANSFERRED CASE (C)  NO.118 OF 2006

WRIT PETITION (C)  NO.697 OF 2007

J U D G M E N T

Jagdish Singh Khehar, J.

The Controversy:

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,  

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pertains  to  the  constitutional  validity  of  the  National  Tax  Tribunal  Act,  2005  

(hereinafter  referred  to  as,  the  NTT  Act).   Simultaneously,  the  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 event of this Court  

not acceding to the 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 NTT,  according to the learned counsel  for  the petitioners,  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 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.

The Historical Perspective:

The Income Tax Legislation, in India:

2(i). Law relating to income tax dates back to 1860, when legislation pertaining  

to levy of tax on income, was introduced in India for the first time.  The original  2

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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 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 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 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 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  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  

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Members (subject to the condition, that the larger bench 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, additionally an Advocate who had been practicing  

before a High Court for a period of 10 years, was also eligible.  Under 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  

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 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.

(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  

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  

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reference, the aggrieved assessee or the Commissioner of Income Tax, could  

assail the refusal by the Appellate Tribunal, before the jurisdictional High Court.  

A 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  by  the  

Commissioner of Income 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 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.

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)/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).

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(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).  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 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  1860),  and  the  Appellate  Tribunal  shall  be  deemed to be a civil court for all the purposes of section 195 and Chapter  XXXV of 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”.

(iii) To be eligible for appointment as the President of the 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  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 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  

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was open to the Appellate 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  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.

(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 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, 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.  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  

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appeal before the High Court was to 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 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 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 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 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 executive revisional powers (under Section 130 of the  

Customs Act), to suo moto, or on an application of an aggrieved person, examine  

the  record  of  any  proceeding,  pertaining  to  a  decision  or  order  under  the  

provisions  of  the  Customs  Act.   Revisional  powers,  besides  those  expressly  8

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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).

(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 Customs Act.  On exhaustion of the above remedy, a further quasi-judicial  

appellate remedy 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 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 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 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 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  

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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 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  

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 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 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 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 dispose of  

appeals,  sitting  singly,  subject  to  the  condition,  that  the  value  of  goods  

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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, 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 Judicial and a Technical Member [Section  

129C(4)(b)].  In case of difference of opinion on any point(s), the opinion of the  

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  

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 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; (b) enforcing the attendance of any person and examining him on  

oath; (c) compelling  the  production  of  books  of  account  and  other  

documents; and (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 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 XXVI of the Code of Criminal Procedure, 1973  (2 of 1974).”

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It  is  apparent  from the above provision,  that  by a  fiction of  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  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 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 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.  

(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,  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 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  

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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 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 arisen.

(vii) The Appellate Tribunal was also authorized to make 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 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  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 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  

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decided by the Appellate Tribunal, or had been wrongly decided by the Appellate  

Tribunal.  The appeal 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 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, 130B, 130C and 130D 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  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 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:

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.  14

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Under the said enactment, the power to assess the duty, was vested with the  

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.  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  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, 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 Tribunal.  The remedy of appeal before the Appellate Tribunal,  

could be availed of (a) against a decision or order passed by 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  (as  it  stood  before  

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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  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 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 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 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 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  

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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 difference in duty or the  

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, and at present, the same is Rs.50 lakhs).  Similar provision (as in  

respect of appeals to the Appellate Tribunal under Customs Act) with regard to  

matters to be heard by a division bench, is enjoined in Section 35D(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 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:-

“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).”

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  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  17

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excise duty was levied.  A reference, on a question of law, made by the Appellate  

Tribunal,  to the High Court,  would be heard by a bench of  not less than two  

judges.   On  the  Appellate  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,  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  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 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 in an appeal pending  

before it,  was differently interpreted by two or more jurisdictional High Courts.  

The decision  of  the Supreme Court,  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  

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Supreme Court would then be 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, 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.   In such an 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 wrongly been decided by the Appellate  

Tribunal.   The 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, 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, 35I and 35J of the Excise 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  was  

satisfied, 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  

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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  

jurisdictional High Courts, would stand transferred to the NTT.  Section 24 of the  

NTT  Act  provided  for  an  appeal  from  an  order  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 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 recommended a direct appeal to the High Courts, from orders 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  following  

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 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  

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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 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 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 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 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  

measure to the above recommendation, the Choksi Committee suggested, the  

desirability of constituting “Special Tax Benches” in High Courts, to deal with the  

large number of pending tax cases, by continuous sitting throughout the year.  It  

was also suggested, that judges who sit on the “Special Tax 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  

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and when the same was constituted.  It is, 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 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  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 NTT.  After the Ordinance lapsed, 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 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 NTT.  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, that had mounted in High Courts all over the  

country,  (2)  huge  tax  recovery  was  statedly  held  up,  in  tax  litigation  before  

various  High  Courts,  which  directly  impacted  implementation  of  national  

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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  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:

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,  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:-

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.

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 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  23

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Courts under Articles 226 and 227 of the Constitution, has also 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 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.

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.

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:

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 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 Court of Bombay  

and the High Court of Delhi.  In the petition filed by the Madras Bar Association, it  24

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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 most southern States was even  

lesser.  It was pointed out,  that the pendency of such appeals in the High Court  

of Karnataka 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 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 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,  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 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  

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figures indicated by the Revenue, with reference to the amount of tax held up in  

pending cases, before High Courts was wholly flawed 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 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  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.   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 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  

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  

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rationale of tax related issues, according to learned counsel, was apparent 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  

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 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  

judicial review traditionally vested in the High Courts, has been excluded, and a  

remedy of appeal has been provided from the tribunals constituted directly to the  

Supreme  Court.   In  this  behalf,  reference  may  illustratively  be  made  to  the  

following provisions:-

(i) The Electricity Act, 2003 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 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  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

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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 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 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 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  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. (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:  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 and Exchange Board of India Act, 1992 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 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.

(v) Companies Act, 1956 Section 10GF.  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  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 sufficient cause from filing the appeal  within the said period, allow it to be filed within a further period not  exceeding sixty days.

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17. It was also pointed out, that the enactment of the  NTT 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 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 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 NTT  

Act, deserved to be set aside.

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 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 conjunction with the instant contention, it was also  

the 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 circumstances.   29

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20. In order to supplement the instant contention, learned counsel also placed  

reliance on Article 225 of the Constitution which is being extracted hereunder:-

“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 jurisdiction of, and the law administered in, any existing 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 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 act ordered or done in the collection thereof was subject  immediately before the commencement of this Constitution shall no longer  apply to the exercise of such jurisdiction.”

Inviting the Court’s attention to the proviso to Article 225 of the Constitution it was  

submitted, that the original jurisdiction of High Courts on matters pertaining to  

revenue or the collection 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 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  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,  to call  upon a Revenue authority  to  

discharge its statutory obligations, in respect of the assessment of tax.  Likewise,  

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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 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 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 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 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:-

“226. Power of High Courts to issue certain writs –  (1) Notwithstanding  anything  in  article  32,  every  High  Court  shall  have  power,  throughout  the  territories  in  relation  to  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 the enforcement of any of the  rights conferred by Part III and for any other purpose.

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emerges from a well 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:

(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 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 of creating a new Court – “the Gun  

Court”, to sit in three 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 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).   For  certain  specified offences  relating  to  

unauthorized  possession,  acquisition  or  disposal  of  firearms  and ammunition,  

“the Gun Court” was required to mandatorily impose a sentence of detention on  

hard  labour.   A  detenue  could  only  be  discharged,  at  the  direction  of  the  

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Governor-General,  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  case  (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 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 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  legislative or executive power of the federation or of one of its 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  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 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 separation of legislative, executive and judicial power as 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,  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 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.

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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 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  prohibition  on  the  exercise  of  legislative  powers by the executive or of judicial powers 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  established  as  a  rule  of  construction  applicable  to  constitutional  instruments  under  which  this  governmental  structure is adopted that the absence of express words to that effect does  not prevent the legislative, the executive and the judicial powers of the new  state being exercisable 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 their Lordships' view,  be misleading - 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 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.’

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.  

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  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 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  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  

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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 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 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-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 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 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 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.

xxxx xxxx xxxx 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 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  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 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.  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  

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determine the length of custodial sentences for criminal offences on a body  composed as 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 door to  the  exercise  of  arbitrary  power  by  the  executive  in  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  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 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 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 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 1.1.1962.  It  was limited in operation to  

those who were accused of offences against the State, on or around 27.1.1962.  

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,  

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the  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 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  

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  

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 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 (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  

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general application.  Although not every enactment  ad hominem,  and  ex post   

facto, necessarily infringed the judicial 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 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  

opinion:-

“In Ceylon, however, the position was different. The 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 unaffected by the new Constitution,  and the Ordinances  under which they functioned remained in force. 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 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 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 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  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 the present day.

xxx xxx xxx

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The  Constitution  is  significantly  divided  into  parts  -  "Part  2  The  Governor-General,"  "Part  3  The  Legislature,"  "Part  4  Delimitation  of  Electoral Districts," "Part 5 The Executive," "Part 6 The 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 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 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 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  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 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 (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  they  were  awaiting  trial.  It  made  admissible  their  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.

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. 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 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  

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alterations  constituted  a  grave  and deliberate  incursion  into  the  judicial  sphere. Quite bluntly, their aim was to ensure 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  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):

"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 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  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  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 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: "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 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 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, and gives no validity to acts which infringe  the Constitution. 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  

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the  Constitution.  In  their  Lordships'  view the  Acts  were  ultra  vires  and  invalid.

xxx xxx xxx It was agreed between the parties that if the Acts were ultra vires  

and invalid, the convictions cannot stand. Their Lordships have therefore  humbly advised Her 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 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 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 to  

examine his 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 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  issues.   Firstly,  

whether  the  sentence  of  detention  during  the  Governor-General’s  pleasure  

authorized  by Section 29(1),  was a power  exercised  by him in his  executive  

capacity.   And  secondly,  whether  the  power  to  determine  the  measure  for  

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his  findings  under  Section  25Z  of  the  Racial  Discrimination  Act,  1975  on  

22.12.1993.   The  defendant’s  complaint  was  found  to  be  substantiated.   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;  (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;  (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  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 $10 000 to the Third Defendant by way  of damages for the pain, humiliation, 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  challenge  raised  by  him came  to  be  formulated  in  the  following  

words:-

"In consequence of the amendments embodied in the Sex Discrimination  and other Legislation Amendment Act 1992 and/or the Law and Justice  Legislation Amendment Act 1993 as they affect the Racial Discrimination  Act 1975 are any, and if so which, of the provisions of Part III of the Racial  Discrimination Act invalid?"   

While adjudicating upon the matter, the High Court of Australia held as under:-

“The plaintiff's challenge to the Act- 15.  The plaintiff's  challenge to particular  provisions of  the Act  is based  upon the proposition that  they provide for  an exercise of  judicial  power  otherwise than in conformity with Ch.III 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  

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proposition  is  not  affected  by  the  provisions  for  review  by  the  Federal  Court.

xxx xxx xxx 21. Although many decision-making functions may take 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 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 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  authoritative  determination by means of  the judicial  method,  that  is,  an  enforceable decision reached by applying the relevant principles of law to  the facts as found.

xxx xxx xxx 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 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  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  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 Commission is  neither made nor registered in the exercise of judicial power. An exercise  of  executive  power  by  the  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  judicial  power;  conversely, an order which takes effect as an exercise of judicial power  cannot be made except after the making of a judicial determination. Thus,  s.25ZAB purports to prescribe what the Constitution does not permit.”

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(v) Our attention was then invited to Reference Re Residential 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  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 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. 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  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 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  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  s.  96  judicial  powers  and  therefore  as  implicitly  limiting  provincial competence to endow a provincial tribunal with such powers.

IV 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. 96 as one of    

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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, 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 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 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 held that the jurisdiction of inferior Courts was not “fixed  forever as it stood at the date of Confederation”. On his view, it was quite  possible to remove jurisdiction from a Superior Court and vest it in a Court  of summary jurisdiction. The question 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 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  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.

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 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  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 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.” 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.  

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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  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  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 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. 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  questions  of  ‘principle’,  that  is,  consideration  of  the  competing  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.  82-90  (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 adjudicatory functions in an administrative tribunal.  The  

first step was determined in the light of the historical conditions existing 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, 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  

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Confederation, then the matter needed to be examined further.  The second 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 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  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 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,  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 been required to be exercised by the concerned administrative tribunal.  

Having examined the controversy in Reference Re Residential  Tenancies Act  

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(supra),  the  Supreme  Court  of  Canada  arrived  at  the  conclusion,  that  the  

Residential Tenancy Commission could have been authorized to grant orders for  

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 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:-

“7.3 Implications of Constitution’s judicature sections (a) Separation of powers

There is no general “separation of powers” in the 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 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-judicial  functions on the courts and (with one important exception, to be discussed)  may confer judicial functions on bodies that are not courts.

Each Canadian jurisdiction has conferred non-judicial  functions on  its courts, by enacting a statute which enables the government to refer a  question of law to the 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 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  Privy  Council  refused  to  read  any  such  limitation  into  Canada’s  Constitution.   Their  lordships  upheld  the  federal  reference  statute,  

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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  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 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 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 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 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,  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  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.

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 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  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 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  

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of  Canada,  A.G.  Que.  v.  Farrah  [1978]  2  S.C.R.  638;  Re  Residential  Tenancies 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  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 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 fully applicable to India as well.  In order to demonstrate this, he  

placed  reliance  on  State  of  Maharashtra  v.  Labour  Law  Practitioners’  

Association, (1998) 2 SCC 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  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 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  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:- 60

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“(a) that he was or had been a Judge of a High Court; or (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 (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 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 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 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 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 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  stood,  Section  9  

provided, that only such persons would be 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  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:-

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“9. (2) A  person  shall  not  be  qualified  for  appointment  as  the  presiding officer of a Labour Court, unless:

(a) he has held any judicial office in India for not less than five  years; or (b) he has practiced as an Advocate or Attorney for 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 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 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:-

“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 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 Court  dwelt  on the fact  that  the powers vested in it  are  similar to those 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  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 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  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 in the judicial service of the State  as defined in Article 236 of the Constitution.”

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The  other  relevant  observations  recorded  in  the  above  cited  judgment  are  

reproduced below:-

“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 extensive  definition given to the term "district judge". This 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 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 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 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 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 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 of Part VI  of the Constitution. So construed it means a judicial office which belongs to  the judicial service as defined 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, 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 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’? The answer, has to be in the negative.  We are of the view  

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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 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."  

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 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.

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 on the part of the framers of the Constitution  to preserve and promote independence of the judiciary from the 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 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 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 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.  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  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,  the judgments and  

text  cited hereinabove,  are fully applicable on the subject  of  administration of  64

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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:-

“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  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  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 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 counsel  for  the petitioners,  that  

historically, constitutionally and legally, the appellate jurisdiction in direct/indirect  

tax matters, has remained with the High 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 exercised by the High Courts to a quasi-

judicial tribunal.

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The third contention:

27. In the course of the submissions advanced by the learned counsel for the  

petitioners on the third contention, 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  

323B  inserted  by  the  Constitution  (Forty-second  Amendment)  Act,  1976  was  

violative  of  the  above  mentioned  components  of  the  basic  structure  of  the  

Constitution.  Article 323B is being extracted hereunder:-

"323B. 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 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:-

(a)  levy, assessment, collection and enforcement of any tax; (b) foreign exchange, import and export across 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 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)  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)  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) 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 in respect of any of those matters; (j)  any  matter  incidental  to  any  of  the  matters  specified  in  sub- clauses (a) to (i).

(3) A law made under clause (1) may- (a) provide for the establishment of a hierarchy of tribunals;

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(b) specify the jurisdiction, powers (including the 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 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; (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  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  fees)  as  the  appropriate  Legislature may deem 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 notwithstanding anything  in any other provision of this Constitution or in any other law for the time  being in force. Explanation.—In 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 respect to such matter in accordance with  the provisions of Part XI.”

Insofar as the aforesaid provision is concerned it was submitted, that Clause (3)  

of Article 323B clearly violated all 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 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  

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asserted, that the process of justice was being substituted, by tribunalization of  

justice, which was clearly unacceptable under the Constitution.  Sub-clause (d) of  

Article 323B(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 referred to in Article 323B(2), including not only the appellate 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 this Court,  

the  legislature  has  repeated  and  reiterated  what  had  been  found  to  be  

unsustainable in law.

28. While  canvassing  the  aforesaid  contention  learned  counsel  for  the  

petitioners pointed out, that the above mentioned Article 323B was introduced by  

the  Constitution  (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 XIV A of the Constitution, inserting Articles 323A and 323B was allowed to  

remain.  It was submitted that Articles 323A and 323B, 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  

“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  

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in Article 323B of the Constitution, was incompatible with the “basic 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, that Article 323B(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  323B  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  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 support his aforestated contention, learned counsel for  

the 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 NTT Act, has been  

enacted, which suffers from the same vices, which had already been 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.

The fourth contention:

30. While advancing the fourth contention, learned counsel for the petitioners  

referred to various provisions of  the NTT Act, which would have the effect  of  69

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compromising  the  independence  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 of the NTT 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. (2) The Benches of the National Tax Tribunal shall ordinarily sit at any  place in the National Capital Territory of Delhi or such other places as the  Central Government may, in consultation with the Chairperson, notify:

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. (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. (5) The Central Government may transfer a Member from headquarters  of one Bench in one State to the headquarters of another Bench in another  State or to the headquarters of any other Bench within a State: 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 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 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 would have to suffer  

extreme hardship for the redressal of their grievance, especially at the appellate  70

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stage.  Besides 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  

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 by  

the Chief  Justice,  in the best  interest  of  the administration of  justice.   It  was  

submitted, that the Central Government, which 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.

(ii) Likewise, learned counsel for the petitioners referred to Section 6 of the  

NTT 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 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. (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 (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.”

Learned  counsel  for  the  petitioners  pointed  out,  that  sub-section  (2),  

aforementioned, laid down the qualifications for appointment as Member of the  71

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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 to be  

treated as eligible as a member of the NTT.  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, 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, 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 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 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 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  

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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, 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.

(iii) Learned counsel for the petitioners then invited our attention to Section 7  

of the NTT Act.  The said section is reproduced hereunder:-

“7. Appointment of Chairperson and other Members - (1) Subject  to  the provisions of sub-section (2), the 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-

(a) the Chief Justice of India or a Judge of the Supreme Court  nominated by him; (b) the Secretary in the Ministry of Law and Justice (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 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 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 belonging to the executive would control the outcome of every  

selection process.  Since the NTT was, an alternative to the jurisdiction earlier  

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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  

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 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. 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-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 years; and (b) in the case of any other Member, the age of sixty-five years.”

According to learned counsel, a perusal of Section 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 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  was submitted, that the tenure of  74

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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 Act,  which is  

reproduced hereunder:-

“13. Appearance before National Tax Tribunal -  (1) A  party  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. (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,-  

(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  obtained  a  certificate of practice under sub-section (1) of 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.”

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) 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 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  represented  through  any  of  its  

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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  the  Revenue  

before the NTT.

Submissions in opposition, by the respondents/interveners:

The first contention:

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 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, 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 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  

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liability  would increase profits  of  an assessee,  but  would reduce the revenue  

receipts  of  the  Government.   In  view  of  the  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 long drawn litigation, wherein tax  

payers  and  the  Government  lock  horns  against  one  another.   Naturally,  this  

impacts  revenue  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  

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 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  

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 respect of the  

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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 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 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 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 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 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  of  tax  disputes.   The  main  reason  

however  was,  that  there was a lack of  clarity  in  law in tax litigation.   It  was  

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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 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.

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 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  created  an  uncertain  and  destabilized  business  environment,  with  

taxpayers not being able to budget, for tax costs.  Importantly such uncertainty,  

according to the learned 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 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  

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at the hands of 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 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  

independent, parallel quasi-judicial hierarchy of tribunals, it was submitted, that  

the  petitioners  had  not  been  able  to  appreciate  the  matter  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 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  attention to the  

proposition,  in  the  manner,  as  was  understood  by  the  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 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  

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(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  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. (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 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  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  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 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  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 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. (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. In either case the  scheme  of  the  particular  Act  must  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.”

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  

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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 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 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 that  remedy and that tribunal.  In due course if dissatisfied 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.”

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.

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.  

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 the  

provisions of the Companies Act, which came up for consideration in Union of  

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India v. Madras Bar Association, (2010) 11 SCC 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 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.  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 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 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  enactments  and  confer  jurisdiction on them to decide disputes in regard to matters arising from  such special enactments. Therefore it cannot be said that legislature has  no power to transfer judicial functions traditionally performed by courts to  tribunals.” 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 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 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.”

42. Similarly, statutory provisions providing for a revision to the District Judge,  

with the finality clauses, have been interpreted to exclude the revisionary powers  

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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:

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 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. 79. Extension of the jurisdiction of a High Court to, and exclusion of the  jurisdiction of a High Court from, any Union territory. 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 –  (a) alcoholic liquors for human consumption. (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal  and toilet preparations containing alcohol  or any  substance included in sub-paragraph (b) of 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. 97. Any other matter not enumerated in List II or List III 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 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 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.  Referring again to entries 82 to 84 it was submitted,  

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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  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 reliance on entries  

11A and 46 contained in List III  of Seventh Schedule.  The above entries are  

being extracted hereunder:

List III – Concurrent List “11A. Administration of justice; constitution and organisation of all courts,  except the Supreme Court and the High Courts.

xxx xxx xxx 46. Jurisdiction and powers of all courts, except the 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 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 III of the Seventh Schedule.  It was, therefore,  

that reliance was placed on entry 11A in List III, to contend that administration of  

justice, constitution and organization of all courts (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  

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46. Additionally,  reliance  was  placed  by  the  learned  counsel  for  the  

respondents, on Article 247 of the Constitution, which is reproduced hereunder:

“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 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 better administration of laws.  It was submitted,  

that this was exactly what the Parliament had chosen to do, while enacting 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 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  Constitution  (Forty-second  Amendment)  Act,  1976.   The  

above  provisions  were  included  in  the  newly  enacted  Part  XIV  A  of  the  

Constitution. It was asserted, that the instant amendment of the Constitution was  

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  

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  

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Supreme Court.  It was however acknowledged by learned counsel representing  

the respondents, that the first of the above mentioned objectives, 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 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 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  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 323B of  

the Constitution.  Furthermore, since the impugned enactment did not exclude  

the jurisdiction of the High Courts 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 emphasise, that the  

jurisdictional road of Courts, as final interpreter of the law, was clearly preserved.  

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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 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 respondents, that no fault can be found  

in the vesting of appellate jurisdiction from orders passed by Appellate Tribunals  

(constituted under the Income Tax Act, Customs Act and the Excise Act) with the  

NTT.   

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 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  

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.  

50. Besides the submissions noticed hereinabove, it was also contended on  

behalf  of  the  respondents,  that  the  assertion  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  

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barred in respect of tax related issues.  It was sought 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 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, 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  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 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 hereunder:

(i) Reliance was also placed on L. Chandra Kumar v. Union of India, (1997) 3  

SCC 261.   Learned counsel  for  the respondents,  while relying on the instant  

judgment, made a reference to various observations recorded therein.  We wish  

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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 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 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.— (1) … … … … … (2) … … … … … (3) Without  prejudice  to  the powers  conferred  on the Supreme  Court by clauses (1) and (2),    Parliament may by 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 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  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  under  the Act  or  upon  Tribunals  created  under  Article  323-B  of  the  Constitution.  It  is  to  be  remembered that, apart 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 77, 78, 79 and 95 of  List I  and to the State Legislatures  under Entry 65 of List II; Entry 46 of List III 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 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  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  

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before the High  Courts has exploded in an unprecedented 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  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 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  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 studies conducted  towards relieving the High Courts of their increased load. In this regard, the  recommendations  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 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, 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 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, 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 on Structure and Jurisdiction of the Higher Judiciary (1974);  Report of High Court Arrears Committee, 1972; LCI, 79 th 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, 124th Report on the  High  Court  Arrears  –  A  Fresh  Look  (1988);  Report  of  the  Arrears  Committee (1989-90).

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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 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:

“… 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 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  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  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,  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 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 Act, 1962, and Section  354 of the Central 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 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  and  criminal  references;  (h)  writ  petitions;  (i)  writ  appeals;  (j)  references under  direct and indirect tax laws; (k) matters arising under the Sales Tax  Act; (l) election petitions under the Representation of the People Act;  (m) petitions under the Companies 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  

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responsible  for  a  very  heavy  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  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 the system”, the LCI stated that the prevailing  view in 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 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  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 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  (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 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 than five years would provide an answer to  the questions posed by the critics of the theory. 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  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,  “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 under Articles 323-A and 323-B of the  

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Constitution.  The  relevant  observations  in  this  regard,  being  of  considerable significance to our analysis, are extracted in full as under:

“Functioning of Tribunals 8.63 Several  tribunals  are  functioning  in  the  country.    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 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 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  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. Its members have been selected from all kinds of  services  including  the  Indian  Police  Service. The  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  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 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  Court.    Such  a  tribunal  must  inspire    confidence  and  public  esteem  that  it  is  a  highly  competent  and   expert  mechanism with  judicial  approach and objectivity.  What  is   needed in a tribunal, which is intended to supplant the High Court, is   legal 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  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  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  Kumar’s  case  (supra)).  

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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 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 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 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 valid. 8.66 The overall  picture regarding the tribunalisation of  justice in  our country is not satisfactory and encouraging. There is a need for  a  fresh  look  and  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    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 carried out within the High Courts, dividing them into separate  divisions  for  different  branches  of  law,  as  is  being  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  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  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 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 of the power of judicial review  conferred upon them.

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90. 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, 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 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 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,  15 and 16 of 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  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 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. 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  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 forced to perform  the  role  of  a  first  appellate  court.  We  have  already  emphasised  the  necessity 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 possibility of an appeal from the Tribunal  on questions  of  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 aforestated contentions, we hold that all decisions of Tribunals,  

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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 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 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  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. 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 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 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 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 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 litigants to directly approach the High Courts  even  in  cases  where  they  question  the  vires  of  statutory  legislations  (except, as mentioned, where the legislation which creates the particular  Tribunal  is  challenged)  by  overlooking  the jurisdiction  of  the  concerned  Tribunal. 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  rendered  hereafter.  To  maintain  the  sanctity  of  judicial  

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proceedings, we have invoked the doctrine of prospective overruling so as  not to disturb the procedure in relation to decisions already rendered.”

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. Delhi High Court Bar  

Association, (2002) 4 SCC 275.  Insofar as the controversy raised in the instant  

judgment is concerned, 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 blocked.  To remedy the above situation, Parliament enacted the Recovery  

of Debts Due to Banks and Financial Institutions Act, 1993.  The Act, inter alia,  

provided  for  establishment  of  tribunals  and  Appellate  Tribunals.   The  said  

tribunals were given jurisdiction, powers and authority, to entertain and decide,  

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 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 was also the claim of those who raised the said challenge,  108

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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  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 III of 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,  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 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 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 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 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  

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who is acquainted with the facts of the case. In this Rule, which deals with  the consideration 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 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 worded. The reason  for  establishing Banking Tribunals being to expedite the disposal  of  the  claims  by  the  banks,  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 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  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 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 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  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 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 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 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  

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and Article 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 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 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 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 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  financial institutions. This forum, namely, that of a civil court, now stands  replaced by a Banking Tribunal in respect of 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 judiciary, there is no reason to presume that the Banking Tribunals and  the Appellate Tribunals so constituted would not be 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 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 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 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 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 227 of the Constitution.

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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 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 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 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, the  High  Courts  do  not  have  original  jurisdiction.  In  order  to  see  that  the  Tribunal is not flooded with cases where the amounts 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 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 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 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  jurisdiction with the subordinate courts or vice versa, cannot be a ground  for holding that the Act is invalid.

xxx xxx xxx 30. By virtue of Section 29 of the Act, the provisions of the Second and  Third  Schedules  to  the  Income  Tax  Act,  1961  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  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.  Thus  now  an  

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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 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 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  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.”

(iii) Reliance was next placed on State of Karnataka v. Vishwabharathi House  

Building Cooperative Society & Ors., (2003) 2 SCC 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, 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 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 to the civil courts.  It was sought to be asserted, that even under Articles  

323A and 323B of the Constitution, Parliament could 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  

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competence of the Parliament and the State Legislatures, to provide for creation  

of courts and 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 III 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 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  Special  Courts  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 III 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 by Section 57(a)(vi) thereof, it was inserted into List III as 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. 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  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.  while  delivering a partially dissenting judgment in Special Courts Bill, 1978, In re:  (1979) 1 SCC 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  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 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  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  

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for the time being in force 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 ordinary law for all intent and purport had  become  illusory.  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. 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  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 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 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 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. 25. Section  13  of  the  said  Act  lays  down  a  detailed  procedure  as  regards the mode and manner in which the 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 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. 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  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; (b) two other members, who shall be persons of ability, integrity  and standing and have adequate knowledge or experience of, or  

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have  shown  capacity  in  dealing  with,  problems  relating  to  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 recommendation of a Selection  Committee consisting of the following, namely:

(i) President of the State Commission: Chairman (ii) Secretary of the Law Department of the State: Member (iii) Secretary  in  charge  of  the  Department  dealing  with  consumer affairs in the State: Member

(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  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 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 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  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 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 to be made on the recommendation of the Selection  Committee, the Chairman whereof would be a person who 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. 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  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 them on any point or points, the same is  

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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  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 its original power as conferred by sub-clause (i) of clause (a) of  Section 21.”

This Court then, having placed reliance on Union of India v. Delhi High Court Bar  

Association  (supra),  Navinchandra  Mafatlal,  Bombay v.  The Commissioner  of  

Income Tax, Bombay City, AIR 1955 SC 58, and Union of India v. Harbhajan  

Singh Dhillon, (1971) 2 SCC 779, concluded as under:-

“37. Once it  is  held that  Parliament  had the legislative 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 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  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 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  benevolent  legislation  intended  to  protect  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 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 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  

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bring about  a  qualitative change in the attitude of  the service provider.  Assignment of reasons excludes or at any rate minimizes 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 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, industry, 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 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 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.

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 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  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 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 III so far  as the State Legislatures are concerned. It was further held that power of  judicial review being the basic structure of the 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:

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  

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the submissions advanced in respect of the third contention, it is 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 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 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  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 Act would be carried out.

The debate, and the consideration:

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 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  

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review”, was liable to be struck down.  This striking down was founded on an  

alleged violation of the “basic structure” doctrine.  Similarly, various provisions of  

the NTT Act, were sought to be assailed. The provisions of the NTT Act were  

challenged, on the premise, that they had trappings of executive control, over the  

adjudicatory process vested with the NTT, and therefore, were liable to be set  

aside as unconstitutional.   

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 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 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 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, whereas the latter, pertained to the amendment of  

Article  31  of  the  Constitution.   The  instant  judgment  was  rendered  by  a  

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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  structure”  of  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  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 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 Government; (3) Secular character of the Constitution; (4) Separation of powers between the legislature, 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 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 judgment:

“487. .....The Rule of Law has been ensured by providing for judicial review.”. xxx xxx xxx

577. ….. Judicial review is undertaken by the courts “not out of any desire to  tilt  at  legislative authority  in  a  crusader’s  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  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 solved by a Court of law. For where  the dispute is, as here, not only between Commonwealth and citizen  but between Commonwealth and intervening States on the one hand  

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and citizens and States on the other, it is only the Court that can decide  the 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  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 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 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 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  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 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  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 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 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):

(1) The supremacy of the Constitution. (2) Republican and Democratic form of government and sovereignty of  the country. (3) Secular and federal character of the Constitution.

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(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  III  and  the  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  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 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 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 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  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 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, 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 not in violation of the other provisions of  the  Constitution.  Our  Constitution-makers  have  provided  for  fundamental  rights in Part III  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 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  

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Supreme  Court  for  enforcement  of  the  fundamental  rights,  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 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).

Judicial review has thus become an integral part of our 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  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 what constitutes amendment under Article 368.

xxx xxx xxx 1533. The  position  as  it  emerges  is  that  it  is  open  to  the  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. 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 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  review has been excluded.

xxx xxx xxx 1537. I may now sum up my conclusions relating to power of amendment  under Article 368 of the Constitution as it 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:

(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 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  

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in view 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.

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  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  rights as well as those which may be said to relate to essential features.  No  part  of  a  fundamental  right  can  claim  immunity  from  amendatory  process  by  being  described  as  the  essence,  or  core  of  that  right.  The  power  of  amendment  would also include within itself  the power to add,  alter or repeal the various articles.

xxx xxx xxx (xiv) The  second  part  of  Article  31-C  contains  the  seed  of  national  disintegration and is invalid on the following two grounds:

(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  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 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 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 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  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 Article 31-C  --

“  and no law containing a declaration that it is for 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.  SCC 1.  In the instant judgment,  this  

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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 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 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 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,  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 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” would ensure free, fair and pure elections.  

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It was sought to be asserted, that the power of “judicial review” in the context  

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 (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 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  

instant judgment rendered by a constitution bench of 5 Judges 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  challenge  the  majority  view  in  Kesavananda  Bharati’s  case,  (1973)  4  SCC  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  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.

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 which is the basic structure of the Constitution.

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52. Judicial review in election disputes is not a compulsion. Judicial review  of decisions in election 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 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  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 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  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 fundamental rights.”

The views expressed by H.R. Khanna, J. are now being reproduced below:-

“175. The prop  osition that the power of amendment under Article 368 does    not  enable  Parliament  to  alter  the  basic  structure  of  framework  of  the  Constitution was laid down by this Court by a majority of 7 to 6 in the case of  His Holiness Kesavananda Bharati  v.  State of  Kerala,  (1973)  4  SCC 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  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 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  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 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  amendment.

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xxx xxx xxx 210. It has been argued in support of the constitutional validity of clause (4)  that  as  a  result  of  this  amendment,  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  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 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 administrative action recognised or established in a  politically organized society (see p. 106, Jurisprudence, Vol. III). 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 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 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  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  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  contained  in  clause (4) with which we are concerned in the present case is, however, of an  altogether  different  nature.  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 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  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  

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constitutional law, can strictly be the subject of a 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 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 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  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  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 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  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 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  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 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  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 convinced the world that he had discovered a new constitutional  

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principle  which  was  universally  valid.  The  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 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 T. Vanderbilt.)

xxx xxx xxx 343. I  think  clause  (4)  is  bad  for  the  reasons  which  I  have  already  summarised. Clauses (1) to (3) of Article 329-A are severable but I express no  opinion on their validity as it is not necessary for deciding this case.

xxx xxx xxx 361. I therefore hold that these Acts are not liable to be 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  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  Court.   The  issue  adjudicated  upon,  

pertained  to  the  constitutional  validity  of  the  Constitution  (Forty-second  

Amendment)  Act,  1976,  and  more  particularly,  Sections  4  and  55  thereof,  

whereby Articles 31C 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-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  

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“basic structure” of the Constitution, by a total exclusion of a challenge to any  

law, even on the ground that it 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.   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:-

“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 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 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  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  the law in the sense  whether it bears direct and reasonable 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 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. It  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.  

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The attempt  therefore  to drape Article 31-C into  a democratic  outfit  under  which an extensive judicial review would be 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, 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  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,  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 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 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 the Parliament and is void since it damages the  basic or  essential  features of  the Constitution and destroys its basic  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  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. 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 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.:-

“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. But then the question arises as  

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to which authority must 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  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  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 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 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  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 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  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. 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 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:

“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 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  

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power under the 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  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  by  the  government  whether  it  be  the  legislature  or  the  executive  or  any  other  authority,  be  conditioned  by  the  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  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 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 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, 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 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  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  the limitation on the amending  power  of  Parliament  and  affect the basic structure of the Constitution. The conclusion must therefore  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 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) clearly laid down and left no doubt that the basic structure of the  Constitution  was  outside  the  competence  of  the  amendatory  power  of  

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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 the  amendment  impugned  before  them,  namely,  Article  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 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 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  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  the  basic  structure  of  the  Constitution  and  Parliament  cannot by exercise of that limited amending power convert 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  to  appreciate  how Parliament  having  a  limited power of amendment can get rid of the limitation by exercising that  very power and 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  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  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.”

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:-

“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  

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for  determination  in  these  writ  petitions.  The  questions  are  of  great  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 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  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 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 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 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 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 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 where judicial expertise,  legal learning, life’s experience and high integrity are components, but  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,  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: “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 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  

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important  inputs  in  successful  justicing.  (Mainstream,  November  22,  1980)”

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  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 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 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 judiciary committed only to the Constitution and to the people of  India. The concept of independence of the judiciary is a noble concept which  inspires the constitutional  scheme and constitutes the foundation on which  rests the edifice of our democratic polity. If there is one principle which runs  through the entire fabric of the Constitution, it is the principle of the rule of law  and under the Constitution, it is the judiciary which is entrusted with the task  of keeping every 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 judiciary in this  task that the power of judicial review has been conferred upon the judiciary  and it is by 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 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  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  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 prejudices acquired and nourished by the class to  which the Judges belong. If we may again quote the eloquent 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  

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Opposition  measure  nor  Government’s  pleasure.  (Mainstream,  November 22, 1980) The  tycoon,  the  communalist,  the  parochialist,  the  faddist,  the  extremist and radical reactionary lying coiled up and subconsciously  shaping  judicial  mentations  are  menaces  to  judicial  independence  when they  are  at  variance with  Parts  III  and  IV  of  the  Paramount  Parchment.”

Judges  should  be of  stern stuff  and tough fibre,  unbending  before power,  economic or political, and they must uphold 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  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” 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  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  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  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 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, (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 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  

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head of  the executive which functions through the Council  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 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.

xxx xxx xxx 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  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, (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, (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, (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  complying  with  the  conditions and circumstances mentioned above does not mar or erode the  independence of judiciary.

xxx xxx xxx 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  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  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 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  itself which contains a very wide power conditioned only by consultation with  

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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 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 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 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 meaning of Article 224(1)  which according to him gives absolute power and complete discretion to the  President  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  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 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 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 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  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 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,  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,  

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AIR 1966 SC 447, the entire interpretation of the 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 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  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  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 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  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 serves to  safeguard one of the basic features which is the cardinal faith underlying our  Constitution, namely, independence of the judiciary. In other words a limitation  on the otherwise absolute power 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 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  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  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.  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 authority but it  

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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 would be made and upon  the  same  being  made  the  sitting  Additional  Judge  recruited  from 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 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 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 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 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:-

“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 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 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 from  one High Court to other High Court without consulting the Chief Justice of  India  as required by Article 222(1)  and 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 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 High  Court by Presidential Notification dated January 19, 1981, in exercise of the  

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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 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  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 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 and rigid that any contravention or transgression of it  would be treated as mala fide or subversive of independence of judiciary and  the decision can be corrected by judicial review. Therefore, at the outset it is  necessary  to  be  properly  informed  as  to  the  concept  of  independence  of  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 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 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 avowed object was widely canvassed  in Sankalchand Himatlal Sheth v. Union of India, (1976) 17 Guj LR 1017 (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 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.

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 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 consultation with any of the Judges of the Supreme  

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Court and of the High Courts. In other words, it was submitted 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 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,  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 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 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  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  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 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 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  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 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  Court should as a rule be appointed as Chief Justice of India except when he  is  physically  unfit  to  shoulder  the  responsibilities.  This  constitutional  

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convention,  it  was  said,  when  read  in  Article  124(2)  would  obviate  any  necessity  of  consultation with any functionary  in the judicial  branch 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 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  Justice  of  India,  every  Judge  in  order  to  curry  favour  would  decide in favour of executive. And as far as Article 124 is concerned it was  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 would be disqualified  from being consulted. There is no warrant for such an extreme 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 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 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 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 because the Chief Minister, the strong  arm of the executive 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 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. 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  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 Judge not  

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giving  consent,  the  arm  of  judicial  review  is  strong  enough  to  rectify  the  executive error.

xxx xxx xxx 815. The  public  interest  like  public  policy  is  an  unruly  horse  and  is  incapable  of  any  precise  definition  and,  therefore,  it  was  urged  that  this  safeguard  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  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 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 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.”

Last of all, reference may be made to the observations of E.S. Venkataramiah,  

J., (as he then was) who held as 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 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  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 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.B.N. Singh was on account of the policy of  the  Government  can  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  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  

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wanted to know over the telephone on January 5, 1981, I 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”.

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  

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  

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.

“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 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 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 the scope of its power. 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  

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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  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 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  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 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 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  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 which 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 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)

“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,  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 emphasise is that judicial review is a vital principle of our  Constitution  and  it  cannot  be  abrogated  without  affecting  the  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 the legislature or is violative of any fundamental rights, it would be  

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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  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 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 the limitation on  the amending power of Parliament and affect the basic structure of the  Constitution. 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. 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 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 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  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 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 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. 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 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 by any law made by Parliament under  

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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 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 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 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 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 of constitutionality as being within the ambit and  coverage of clause (2)(d) of Article 323-A, only if  it  can be shown 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  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, 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 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  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  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-

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General  on behalf  of  the Central  Government  assured the court  that  early  steps would be taken to amend the law so as to save 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  amendments  were  brought  about  and  by  now an  appropriate Act of 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 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  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; (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; (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 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 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  exclude officers and servants in the employment of the Supreme Court and  members and staff of the subordinate judiciary from the purview of the Act. In  the same memorandum it has also been said that Government would arrange  for sittings of the Benches of the Tribunal at the seat or seats of each High  Court on the basis that ‘sittings’ will  include ‘circuit  sittings’ and the details  thereof  would  be  worked  out  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 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 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 unreality. I am  

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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,  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  emphasise is that judicial review is a vital principle of our Constitution  and it cannot be abrogated without affecting the 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 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  meaningless  and  futile.  So  also  if  a  constitutional 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  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 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 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 not a fundamental right. Yet, the High Courts, as the working  experience of three-and-a-half 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 Constitution, not only has India’s population been more  than doubled but also the number of litigations before the courts including the  High  Courts  has  greatly  increased.  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 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  

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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 pending cases before this  Court and 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  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  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 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  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 contained  the enabling 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]

“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 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  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, 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…”

In  the  meantime  the  problem of  the  backlog  of  cases  in  the  High  Courts  became  more  acute  and  pressing  and  came  to  be  further  discussed  in  Parliament  and in  conferences  and seminars.  Ultimately  in  January  1985,  

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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 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, 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 but under the belief and faith that justice shall be  done to them and the State's authorities would implement the 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 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 SCC 261.  The instant decision was  

rendered by a constitution bench of 7 Judges.  The question which arose for  

determination in the instant judgment was, whether the power conferred upon the  

Parliament  and the State  legislatures vide Articles 323A(2)(d)  and 323B(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.  

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  

the  tribunals  constituted  under  Articles  323A  and  323B  of  the  Constitution,  

possess  the  competence  to  test  the  constitutional  validity  of  statutory  

provisions/rules?  And also, whether Tribunals constituted under Articles 323A  

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and 323B of  the Constitution could  be said to be effective substitutes  of  the  

jurisdiction vested 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  

SCC 400, on account of the decisions rendered in post  S.P. Sampath Kumar  

cases (supra), 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 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 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 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 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 for a Judge who is confronted with the question whether a  particular  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 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.

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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  toto,  it  appears  that  this  Court  has  always  considered  the  power  of  judicial review vested in the High Courts and in 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 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 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 Constitution of India, being alive to such  criticism,  has,  while  conferring  such  power  upon  the  higher  judiciary,  incorporated important 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 of judicial 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. 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  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 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 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 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  

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function of constitutional interpretation. We, therefore, hold that the 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  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 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.

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  suggested  that  the  Tribunals  be  made  subject  to  the  supervisory  jurisdiction  of  the  High  Courts  within  whose  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  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  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 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  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 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 many of the ills of the present system. If the need arises,  there can be separate umbrella organisations at the Central and the State  

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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 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 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 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. 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  SCC 401,  we believe  that  the  approach  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  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 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 construed, Section 5(6) will no  longer be susceptible to charges of unconstitutionality. 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 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 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  Article  323-A  and  Article  323-B  of  the  Constitution  are  possessed of the competence to test the constitutional validity of statutory  

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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 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 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 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 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  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 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, 10-FD, 10-

FE, 10-FF, 10-FL(2), 10-FO, 10-FR(3), 10-FT, 10-FX contained in Parts I-B and  

I-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  161

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of  powers”  and  “independence  of  judiciary”?   The  relevant  narration  and  

conclusions recorded by this Court are being reproduced hereunder:-

“Section 10-FD(3)(f): Appointment of Technical Member to NCLT 16. The High Court has held that appointment of a member under the  category specified in Section 10-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 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  exists  in  Section  4(3)  of  the  Sick  Industrial  Companies  (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 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 10-FD(3)(g): Qualification for appointment of Technical Member 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  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 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  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 10-FL(2) for cases relating to 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. Section 10-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 than 15 years is vague and should  

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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 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 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 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 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.

xxx xxx xxx Section 10-FX: Selection process for President/Chairperson 31. The High Court  has expressed the view that  the selection of  the  President/Chairperson  should  be  by  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  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 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 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  

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converting “judicial review” into judicial legislation.  It was, however noticed, that  

the Union of India having agreed to rectify 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  10-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 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 I-B NATIONAL COMPANY LAW TRIBUNAL

10-FB. Constitution of National Company Law Tribunal.—The Central  Government  shall,  by  notification  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. 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. 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 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 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 partly in practice as an advocate  for a total 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 Company Law  Service (Legal Branch) in Senior Administrative Grade in that service;  or

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(d) has held for at least fifteen years a Group A post or an equivalent  post under the Central Government (including at least three years of  service as a Member  of  the Indian Legal  Service in Grade I  of  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 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 (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  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 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 (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 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, banking, industry, law, matters relating  to 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 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 experience of not less  than fifteen years in, the matters relating to labour. Explanation.—For the purposes of this Part,—

(i) ‘judicial member’ means a Member of the 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) of Section 10-FD.

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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 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-seven years; (b) in the case of any other Member, the age of sixty-five years: Provided further that the President or other Member may retain his  

lien with his parent cadre or Ministry or 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  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  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 control of the Member (Administration).

* * * 10-FK. Officers  and  employees  of  Tribunal.—(1)  The  Central  Government  shall  provide  the  Tribunal  with  such  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. (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  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  clauses (a) to (f) of sub-section (3) of Section 10-FD:

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, 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 ought to be heard by a Bench consisting of two  Members, the case or matter may be transferred by the President of the  

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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  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  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 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 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  be decided according to the  opinion of the majority of Members of the Tribunal  who have heard the  case, 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 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  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.

* * * 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  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.

PART I-C APPELLATE TRIBUNAL

* * * 10-FR. Constitution  of  Appellate  Tribunal.—(1)  The  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  

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Chairperson and not  more than two Members,  to be 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. (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,  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.

* * * 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 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,—

(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.

* * * 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 Committee consisting of—

(a) Chief Justice of India or his nominee       Chairperson; (b) Secretary  in  the  Ministry  of  Finance  and  Company  Affairs

Member; (c) Secretary in the Ministry of Labour       Member; (d) Secretary in the Ministry of Law and Justice (Department of  Legal Affairs or Legislative Department)        Member; (e) Secretary  in  the  Ministry  of  Finance  and  Company  Affairs  (Department of Company Affairs)                   Member.

(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.

* * * (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 prejudicially his  

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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  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.

* * * 10-G. Power to punish for contempt.—The Appellate 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 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; (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.

* * * 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 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.

* * * 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 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  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.”

Having  noticed  the  relevant  statutory  provisions,  this  Court  made  detailed  

observations  relating  to  “difference  between  Courts  and  Tribunals”,  “Re:  

independence  of  judiciary”,  “separation  of  powers”,  and  “whether  the  

Government can transfer judicial functions traditionally performed by Courts, to  

Tribunals”, as under:-

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“70.  But  in  India,  unfortunately  tribunals  have  not  achieved  full  independence. The Secretary of the “sponsoring 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 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, (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? 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 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 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, 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, 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 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 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 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 the Supreme  Court, with respect to any of the matters in the Union List. 75. The Concurrent List (List III of the Seventh Schedule) enumerates  the matters with respect to which Parliament and the Legislature of a State  

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will have concurrent power to make laws. Entry 11-A of List III refers to  administration of justice, constitution and organization of all courts except  the  Supreme  Court  and  the  High  Courts.  Entry  46  of  List  III  refers  to  jurisdiction  and  powers  of  all  courts,  except  the  Supreme  Court,  with  respect to any of the matters in List III. 76. Part XIV-A was inserted in the Constitution with effect from 3-1-1977  by the Constitution (Forty-second 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 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.

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, Entry 11-A read with Entry 46 of List III 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  SCC  412,  held  that  Articles  323-A  and  323-B  are  enabling  provisions which enable the setting up of tribunals contemplated therein;  and that the said articles, however, cannot be interpreted to mean that they  prohibited the legislature from establishing tribunals not covered by those  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 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. 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 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 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  

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Tribunals,  Motor  Accidents  Claims  Tribunals  and  Special  Courts  under  several 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  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. 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 case claim the status as Judges of the High Court  or parity or as substitutes. However, the personnel 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.  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  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 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 addition to judicial members in such tribunals, let us  turn our attention to the question as to who can be the members. 93. If  the  Act  provides  for  a  tribunal  with  a  judicial  member  and  a  technical  member,  does  it  mean that  there  are  no  limitations  upon the  power of the legislature 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  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 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

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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  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 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. 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  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 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 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  constitutional provisions which enshrine the principles of the rule of law,  separation of powers and independence of the judiciary.

xxx xxx xxx 106. We may summarise the position 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  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 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. (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  

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not involve any 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  necessary,  tribunals  should  have  technical  members.  Indiscriminate  appointment  of  technical  members  in  all  tribunals  will  dilute and adversely affect the independence of the judiciary. (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 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 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.

xxx xxx xxx 113. When the Administrative Tribunals were constituted, the presence of  members  of  civil  services  as  Technical  (Administrative)  Members  was  considered  necessary,  as  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 suitable to function as technical members in  the  Company  Law  Tribunals  or  other  tribunals  requiring  technical  expertise. The tribunals cannot become providers of sinecure to members  of civil  services, by appointing them as technical members, though they  may not have technical 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  Forces  Tribunals,  or  electrical  engineers  being  members of the Electricity Appellate Tribunal, or telecom engineers 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 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. A litigant may legitimately think  that such a member will  not be independent and impartial.  We reiterate  

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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  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  independence  of  members  discharging  judicial  functions  in  a  tribunal  cannot be diluted.

xxx xxx xxx 120.  We may tabulate the corrections required to set right the defects in  Parts I-B and I-C of the Act:

(i) 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 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 Service (Legal  Branch) and the Indian Legal Service (Grade I) cannot 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  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 Court Judge to the members, but by ensuring that persons  who are as nearly  equal  in rank,  experience or competence to High  Court Judges are appointed as members. Therefore, only officers who  are holding the ranks of Secretaries or Additional Secretaries alone can  be considered for appointment as technical  members of the National  Company  Law Tribunal.  Clauses  (c)  and  (d)  of  sub-section  (2)  and  clauses (a) and (b) of sub-section (3) of Section 10-FD which provide  for  persons  with  15  years  experience  in  Group  A  post  or  persons  holding the post of Joint Secretary or equivalent post in the Central or  the State Government, being qualified for appointment as Members of  Tribunal, are invalid. (iii)  A “technical  member”  presupposes  an experience in  the field to  which  the  Tribunal  relates.  A  member  of  the  Indian  Company  Law  Service  who  has  worked  with  Accounts  Branch  or  officers  in  other  departments  who  might  have  incidentally  dealt  with  some aspect  of  company  law  cannot  be  considered  as  “experts”  qualified  to  be  appointed as technical members. Therefore clauses (a) and (b) of sub- section (3) are not valid.

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(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,  banking,  industry  could  be  considered  to  be  persons  with  expertise  in  company  law,  for  being  appointed  as  technical  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  however  be  considered  as  persons  having  expertise in  rehabilitation/revival  of  companies and therefore,  eligible  for being considered for appointment as technical members. (vi)  In  regard  to  category  of  persons  referred  in  clause  (g)  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 of  civil  services of  the  rank of  the Secretary or Additional  Secretary in the Indian Company  Law  Service  and  the  Indian  Legal  Service  can  be  considered  for  purposes of appointment as technical members of the Tribunal. (viii)  Instead  of  a  five-member  Selection  Committee  with  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  Selection  Committee should broadly be on the following lines:

(a)  Chief  Justice  of  India  or  his  nominee—Chairperson  (with  a  casting vote); (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 (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  term. This is because 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 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  a  reasonable  period  of  service.

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(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  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. (xi) To maintain independence and security in service, sub-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. (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. (xiii)  Two-member  Benches  of  the  Tribunal  should  always  have  a  judicial  member.  Whenever  any  larger  or  special  Benches  are  constituted,  the  number  of  technical  members  shall  not  exceed  the  judicial 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 been resolved.  These have been noticed in an  

order passed by this Court in Madras Bar Association v. Union of India, (2010) 11  

SCC 67, which is being extracted hereunder:-

“1. In all these petitions, the constitutional validity of the 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 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  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,  including  trial  of  offences  and  adjudication  of  pure  questions  of  law,  which  have  always  been  in  the  exclusive domain of the judiciary.

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2. When these  matters  came up on  9-1-2007  before  a  three-Judge  Bench, the challenge to various sections of the 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 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 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 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 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”. 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 (c) Secretary in the Ministry of Finance. It was contended by  the  petitioners  that  two  of  the  members  who  are  Secretaries  to  the  Government  forming the majority  may override the opinion of  the Chief  Justice or his nominee which was improper. It was stated on behalf of the  Union 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  by  the  petitioners, it was submitted that the Union 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 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 I-B and I-C of the  Companies Act, 1956 were in 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 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.

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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  (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 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 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 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 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 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 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)(d)  of  Article  323-B  but  did  not  consider  the  validity of other provisions of Article 323-B. 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 to several entries of Lists I  and III of the Seventh Schedule and consequently there was no challenge  to this article. 14. The basis of attack in regard to Parts I-B and I-C of the Companies Act  and the provisions of the NTT Act are completely different. The challenge  to Parts I-B and I-C of the Companies Act, 1956 seeks to derive support  from Article 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 NTT Act is based on the challenge to Article  323-B itself. 15. We therefore find that these petitions relating to the validity of the NTT  Act and the challenge to Article 323-B raise issues which did not arise in  

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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  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,  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 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 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) In Indira Nehru Gandhi case (supra), this Court arrived 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  above  

legislative  provision,  an  election  declared  void,  on  the  culmination  of  an  

adjudicatory process, was treated as valid.  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  

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assailed,  violated  a  principle  which  constituted  the  “basic  structure”  of  the  

Constitution.  The argument raised in opposition was, that a determination which  

had a bearing on just one (or a few) individual(s) would not raise 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 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 (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, 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, 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 amending power of  

the Parliament, and the same was void, because it had the effect of damaging  

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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 of the rights conferred by  

Articles  14  and  19  of  the  Constitution.   Furthermore,  Section  55  of  the  

Constitution  (Forty-second  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 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, 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 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 be possessed of the expertise in decision making.  And  

secondly, because the legal protection afforded to citizens by the Constitution  

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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 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 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  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 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 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”  

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would become a teasing 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 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 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 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, in our  

considered view was expressed by the words, “Human ingenuity, limitless though  

it may be, has yet not devised 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 certain conclusions with reference to High Court and Supreme  

Court  Judges.  It  was held,  that their  appointment and removal,  as also their  

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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 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 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 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,  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 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 Court to the effect that  

“separation  of  powers”,  “rule  of  law” and “judicial  review”  at  the hands of  an  

independent judiciary, constitute the “basic structure” of the Constitution, we are  

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in   a  position now to  determine,  how  the   aforesaid   concepts  came to  be  

adopted by this Court, while adjudicating upon the validity 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, 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, being a substitute of the High Court, ought to  

have been 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  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  

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  less  

independent, and no less judicious, than the High Court (which was sought to be  

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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 institutional  

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 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  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 of the 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 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 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  

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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 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  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  adjudication  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 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.

(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 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  

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Constitution.   “Judicial  review” was again held to be an integral  and essential  

feature  of  the  Constitution,  constituting  its  “basic  structure”.   It  was  further  

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,  

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  

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 funds for the  

fulfillment of their administrative requirements.  Although the determination of the  

governmental  organization,  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 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”  

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vested in the High Court, clause (2)(d) of Article 323A and clause (3)(d) of Article  

323B, 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  

legislations enacted under the aegis of Articles 323A and 323B, were also held to  

be unconstitutional.  In view of the above, it was concluded, that the jurisdiction  

conferred upon the High Court under Articles 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 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 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,  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 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,  

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whereupon the fundamental requirements, which need to be kept in mind while  

transferring  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 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 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  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,  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  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  

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to discharge their duties in an independent and impartial manner.  The manner of  

their  appointment  and  removal  including  their  transfer,  and  tenure  of  their  

employment, should have adequate protection so as to be shorn of legislative  

and executive 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.   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  standards,  whereupon  it  would  be  open  to  a  court  to  interfere  

therewith.   Such  an  exercise  would  naturally  be,  a  part  of  the  checks  and  

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.

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 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,  

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that the power of “judicial review” stands breached with the promulgation of the  

NTT 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 Kumar case (supra),  namely,  that  “judicial  review”  

was an integral 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 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 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 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  

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  

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any specified subject, to any court/tribunal.  But it was clarified, that Parliament  

could not transfer power vested in the High Courts, by the Constitution itself.  We  

therefore have no hesitation in concluding, that appellate powers vested in the  

High Court under different statutory 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 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 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 by the High Court under Articles 226 and 227  

of the Constitution has remained unaltered, the power vested in High 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 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 NTT  

Act violates the “basic structure” of the Constitution, cannot be acquiesced to.

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65. Even  though  we  have  declined  to  accept  the  contention  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 (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 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.   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 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 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  

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consonance with the procedure depicted in “Part XI” of the Constitution.  It is also  

the contention of the learned counsel for the respondents, that 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  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 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 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  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  

legislation had been enacted by following the prescribed procedure,  and was  

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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 accordingly declined.

II. Whether the transfer of adjudicatory functions vested in the High Court to  the NTT violates recognized constitutional conventions?  

III. Whether while transferring jurisdiction to a newly created court/tribunal, it is  essential to maintain the standards and the stature of the court replaced?

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 NTT Act, from other perspectives also.  

We shall now advert to the alternative contentions.  First and foremost, it was the  

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 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 NTT, constituted 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  perspective  reveals,  that  as  against  the initial  assessment  of  197

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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 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  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  “judicial  proceedings”.   Again  

across the board, under all the enactments, relevant for the present controversy,  

questions of law were originally left to be adjudicated by the jurisdictional High  

Courts.  The reference jurisdiction,  was substituted in all  the 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 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 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 promulgation of the Constitution,  the core  

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judicial appellate functions, for 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 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.   

68. Before we proceed with the matter further, it is necessary to keep in mind  

the composition of the adjudicatory authorities which have historically dealt with  

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  Judicial  Members,  besides  

Accountant  or  Technical  Members.   To  qualify  for  appointment  as  a  Judicial  

Member, it was essential that the incumbent had held a judicial office in India for  

a period of 10 years, or had practiced as an Advocate for a similar period.  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”.  

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  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 by benches comprising of at least two  

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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 role,  of the jurisdictional  High Court  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  of  the  NTT  Act,  all  

legislative provisions vested the appellate power of adjudication, arising out of  

the Income Tax Act, the Customs Act and the Excise Act, on questions of law,  

with the jurisdictional High Courts.  

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 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 provisions of the  

Constitution  mandate,  that  tax  issues  should  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 jurisdiction on tax matters, to remain with the jurisdictional  

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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  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  

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  learned  counsel  for  the  

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 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 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  

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Court, as was the position before the enactment of the Constitution, and, as has  

been the position 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 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 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  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 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 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  

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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 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 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 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  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 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 (supra).  Therein, this Court has recognized, that transfer of  

jurisdiction is permissible, but in effecting such transfer, the court to which the  

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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 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  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/tribunal would have to be established, in consonance with  

the  salient  characteristics  and  standards  of  the  court  which  is  sought  to  be  

substituted.

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 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 for us to deal  

with  the  instant  aspect  of  the  matter,  for  the  reason  that,  in  the  judgments  

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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.   

73. The other provision relied upon by the learned counsel for the 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 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 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 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  Courts”.   It  is,  therefore  apparent,  that  the  issue  in  hand,  namely,  the  

appellate  jurisdiction  vested  with  the  jurisdictional  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.

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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 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 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 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 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 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  practitioners,  or  any  person  duly  

authorized by him, to present his case before the NTT.  The pointed submission  

advanced on behalf of the Institute of Chartered Accountants of India was, that  

under Section 13 of the NTT Act, Chartered Accountants are entitled to appear  206

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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  

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  

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 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 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  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 university or  Board.  The  public  at  large  was  cautioned  by  the  said  public  notice  published in the newspaper about such position in law.

xxx xxx xxx 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 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 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. It may be indicated that such view  of ours is reflected from the Objects and Reasons indicated for introducing  

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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  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 (i) the rights to practise 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 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  Indian   Medicine in that State for not less than five years where no register  of Indian Medicine was 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  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 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  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 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 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 face of 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.”

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Reliance was also placed on State of Rajasthan v. Lata Arun, (2002) 6 SCC 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 Nurse Course (hereinafter referred to as  “Nursing Course”)  commencing in the year 1990.  The Director,  Medical  and Health Services had invited applications by 15-12-1989 from eligible  candidates for admission in the Nursing Course to be started from January  1990.  It  was  stated  in  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  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.

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  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  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  examine whether the policy decision or  the administrative order dealing  with the matter is based on a fair, rational 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  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,  that  under  Section 288 of  the Income Tax Act,  

1961, read with Rule 50 of the Income Tax Rules, 1962, Chartered Accountants  209

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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 35Q of the Central 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  

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, 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 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 the NTT.  It was therefore asserted, that Section  

13 of the NTT Act rightly permitted Chartered Accountants to represent a party to  

an  appeal  before  the  NTT.   The  submission  on  behalf  of  the  Institute  of  

Chartered  Accountants  was,  that  Company  Secretaries  were  not  comparable  

with them, and therefore, as a matter of policy, they had no legitimate claim for  

being allowed to represent a party before the NTT.

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77. It is pertinent to record, that during the course of hearing we had required  

learned  counsel  representing  the  petitioners,  to  file  a  compilation  of  cases,  

wherein  provisions 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 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: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 Sri Sri Sridhar  Jiew v. I.T.O. (1967) 63 ITR  192 (Cal)

A Hindu idol is a juristic entity that is given the status of a  human being capable of having property and it can be called  an ‘individual’.

2 C.E.D. v. Alladi  Kuppuswamy (1977) 108 ITR  439 (SC)

Though  a  widow  cannot  be  a  coparcener,  she  has  copercenary  interests  and  she  is  also  a  member  of  the  coparcenary by virtue of the rights conferred by the Hindu  Women’s Rights to Property Act, 1937.

3 Narendranath v.  C.W.T. (1969) 74 ITR  190 (SC)

There  is  no  distinction  between  property  obtained  by  a  member of HUF on a partition and the property that belongs  to  a  member  as  a  sole  surviving  coparcener  by  right  of  survivorship.

4 Goli Eswariah v.  C.G.T. (1970) 76 ITR  675 (SC)

A unilateral declaration of a Hindu coparcener, whereby he  throws his self-acquired property into the common stock of  the joint family property, does not amount to a transfer and,  therefore, such an act does not constitute a gift.

5 C.I.T. v. Sandhya  Rani Dutta (2001) 248 ITR  201 (SC)

The  Supreme  Court  held  that  the  wife  and  daughters  inheriting the property of a male Hindu do not form a HUF  and that they could not also form such family by agreement  among  themselves  by  throwing  their  respective  inherited  shares in the hotchpot.

6 C.I.T. v. Bharat  Prasad Anshu  

The gift of property of a HUF to the members of the family is  not void but voidable.

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Kumar (2001) 249 ITR  755 (Delhi)

7 C.W.T. v. M.A.R.  Rajkumar (1997) 226 ITR  804 (AP)

Even  the  fact  that  the  wife  had  given  up  her  right  to  maintenance does not mean that she is no longer a member  of the family of her husband.

8 C.G.T. v. B.S.  Apparao (2001) 248 ITR  103 (AP)

The  amount  spent  by  a  Hindu  father  on  his  daughter’s  marriage is treated as maintenance (and not a gift)  under  the Hindu Adoptions and Maintenance Act, 1956.

9 Gowli Buddanna  v. C.I.T. 60 ITR 293 (SC)

A  sole  surviving  coparcener  can  constitute  a  Hindu  undivided family.

10 C.W.T. v.  Chander Sen 161 ITR 370(SC)

The separate property of the father inherited upon intestacy  by the son is to be treated as the son’s separate property  and not as the property of his joint family.

11 C.I.T. v. Radhe  Shyam Agrawal 230 ITR 21  (Patna)

If on partition of the family, separate shares are allotted to  the  karta, his wife and children, the existence of the Hindu  undivided  family  comes  to  an  end,  and  the  share  of  the  erstwhile karta becomes his separate property.

12 Kaniram  Hazarimull v.  C.I.T. 27 ITR 294 (Cal)

A joint Hindu family, as such, cannot be a partner in a firm.  However, it may enter into a partnership through its karta.

13 C.I.T. v. Bainik  Industries 119 ITR 282 Pat)

A  female  member,  as  a  member  of  a  joint  family,  can  become  a  partner  in  a  firm  as  the  representative  of  her  family.

14 C.G.T. v. Getti  Chettiar 82 ITR 599 (SC)

Unequal partition amongst coparceners in a HUF does not  amount to a gift.

15 Paramanand  Bajaj v. C.I.T. 135 ITR 673(Kar)

In the reunion of a HUF, all assets originally partitioned need  not be pooled back.

16 Pushpa Devi v.  C.I.T. 109 ITR 730(SC)

The  scope  of  the  theory  of  blending  in  Hindu  law  was  discussed in detail.

17 C.I.T. v. B. Indira  Devi 238 ITR 846  (Ker)

Gift  deed  executed  by  the  assessee  in  favour  of  her  daughter to secure her future after marriage was not due to  any legal obligation enjoined upon the assessee by virtue of  Section 20 of the Hindu Adoptions and Maintenance Act, but  for other considerations.  Therefore, the gift being voluntary  within the meaning of Section 2(xii) of the Gift Tax Act, 1964,  was liable to tax.

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18 Sathyaprana  Manjunatha  Gowda v. C.E.D. 227 ITR 130  (SC)

Meaning  of  “coparcenary”,  “HUF”  and  “survivorship”  discussed.

19 C.I.T. v.  Shakuntala (1961) 43 ITR 352  (SC)

Income from shares held by the members of HUF cannot be  termed as the income of HUF.

20 C.W.T. v. Late R.  Sridharan 104 ITR 436  (SC)

Divided  member  marrying  a  Christian  under  Special  Marriage Act, 1956.  HUF way of living practiced by divided  member and son – continue to be HUF – meaning of word  “Hindu” discussed.

II: Company Law: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 C.I.T. v. Light  Publications Ltd. (2001) 251 ITR  0120 (Guj.)

A private company becoming a public company by virtue of  the provisions of Section 43A of the Companies Act, 1956  may  still  not  become a  “company  in  which  the  public  are  substantially interested” due to the restriction imposed on its  shareholders  upon transferability  of  its  shares  to  the other  members of the public.

2 C.I.T. v. Sunaero  Ltd. (2012) 345 ITR  0163 (Del)

Presumption that a registered shareholder holds the share in  his own right and any claim that shares were being held as a  nominee has to be proved by the person claiming so.

3 Rajasthan  Financial  Corporation v.  C.I.T. 163 ITR 278(Raj)

Shares  of  a  single  type  issued  by  a  State  Financial  Corporation providing for minimum and maximum dividend  cannot be termed as ‘preference shares’.

4 Bacha F. Guzdar  v. C.I.T. AIR 1955 SC 74

(i)   Partnership  is  merely  an  association  of  persons  for  carrying on the business of 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 stands  as a separate juristic entity distinct from the shareholders. (ii)   Shareholders  have  no  right  in  the  property  of  the  company.  They are only entitled to dividends and a share in  the surplus, if any, after the dissolution of the company.

5 Juggilal  Kamlapat v.  C.I.T. AIR 1969 SC  932; C.I.T. v.  Poulose and  

Although  company  is  a  separate  legal  entity,  in  certain  exceptional cases, the Court can lift the veil of the corporate  entity and have regard to the economic realities behind the  legal façade.

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Mathen (Pvt.)  Ltd. (1999) 236 ITR  416 (Ker)

6 C.G.T. v. Indo  Traders &  Agencies  (Madras) Ltd. 131 ITR 313  (Mad)

Valuation of shares-reasonable valuation has to be accepted  unless the valuation shocks conscience of the court.

7 Vodafone  International  Holdings BV v.  UoI 341 ITR 1 (SC)

In company law, there is no transfer of a share when there is  a transfer of underlying assets.  Various issues of lifting of  the  corporate  veil  discussed.   Also discussed,  briefly,  the  enforceability of shareholders’ agreements.

8 C.I.T. v. Suleman  Khan and  Mahaboob Khan  and Co. (2002) 257 ITR  0170 (AP)

A firm of 20 major partners and 3 minor partners does not  contravene Section 11(2) of the Companies Act, 1956 since  minors are not to be reckoned as partners for the purposes  of the calculation.

9 Marshall Sons  and Co. (India)  Ltd. v. I.T.O. (1997) 223 ITR  809 (SC)

Amalgamation  –  date  of  transfer/  date  of  amalgamation  /  transfer is the date specified in the scheme as the transfer  date.

10 C.I.T. v. Mrs.  Grace Collis and  others 248 ITR 323(SC)

a)  On amalgamation there is an extinguishment  of  rights  and, therefore, there is a transfer. b)   The  amalgamation  scheme  sanctioned  by  the  court  would be an instrument within the 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 instrument.

11 Anarkali  Sarabhai v. C.I.T. 227 ITR 260(SC)

Redemption of preference shares amounts to transfer and is  liable to capital gains.

12 C.I.T. v. Artex  Manufacturing  Co. 227 ITR 260(SC)

Gains  arising  out  of  slump  sale  of  business  as  a  going  concern  is  liable  to  tax  under  Section  41(2)  on  itemized  basis if slump sale is determined on valuation of each asset/  liability.

13 C.I.T. v. Gold  Mohore  Investment  Company Ltd. (1970) 78 ITR 16  (SC)

Valuation of bonus shares – The correct method to apply in  cases where bonus shares rank  pari  passu is to take the  cost  of  the  original  shares  and  to  spread  it  over  all  the  original  as  well  as  the  bonus  shares  and  to  find  out  the  average price of all the shares.

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14 Hansur Plywood  Works Ltd. v.  C.I.T. (1998) 229 ITR  112 (SC)

When a shareholder gets a bonus share the value of  the  original  share  held  by  him  goes  down.   In  effect,  the  shareholder gets two shares instead of the one share held  by him and the market value as well as the 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.

15 Shree Gopal  Paper Mills Ltd. v.  C.I.T. (1967) 64 ITR 233  (Cal)

Issuance  of  share  takes  place  when  entry  of  name  of  subscriber or successful offerer is made in the Register of  Members.

16 Dalmia  Investment Co.  Ltd. v. C.I.T. (1961) 41 ITR  705 (Pat)

Though no cash is paid by the shareholders for allotment of  the bonus shares, the set-off for dividend which was due to  be  paid  to  the  shareholder  out  of  undistributed  profits  of  company can be regarded as consideration for  the bonus  shares.   Therefore,  real  cost  of  bonus  shares  to  shareholder/assessee is  the value of  shares  as shown in  books of account of the company.

17 Anarkali  Sarabhai v. C.I.T. 227 ITR 260  (SC)

Redemption of preference shares is “transfer” and liable to  capital gains.

18 C.I.T. v. Artex  Manufacturing  Co. 227 ITR 260  (SC)

Gains arising out of “slump sale” of a business as a going  concern  is  liable  to  tax  under  Section  41(2)  on  itemized  basis if the slump sale is determined on valuation of each  asset/liability.

III: Mohammedan Law: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 Trustees  of  Sahebzadi  Oalia  Kuslsum Trust v.  C.E.D. [1998]  233  ITR  434 (SC)

A gift was made to the assessee by his father granting him  life estate and the remainder to his children.  Deed was held  to be void under Mohammedan law.  It was held to be an  absolute gift.

2 S.C.M.  Mohammed v.  C.I.T. [1999] 235 ITR  75 (Mad)

Principles of Mohammedan law regarding gift analyzed and  applied – gift with limited 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  Khan v. C.I.T.  [1985] 153 ITR  

Deferred dower on the dissolution of marriage by death or  divorce  is  not  a  contingent  debt  because  one of  the  two  events  is  bound  to  happen.   Wife  cannot  demand  the  

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707 (AP) payment of deferred dower before the event, but husband  can pay even earlier.

4 Ziauddin Ahmed  v. C.G.T. (1976) 102 ITR  253 (Gau)

A family arrangement is valid amongst Muslims.

5 C.I.T. v. Puthiya  Ponmanichintaka m Wakf, 44 ITR 172 (SC)

A wakf cannot be a partner, but the mutawalli of a wakf can  be.

6 Ahmed G H Ariff  v. C.W.T. 76 ITR 471 (SC)

Held,  the moment  a wakf  is created all  rights of  property  pass out of wakf and vest in the Almighty – Property is a  term of the widest import and subject to any limitation which  the context may require; it signifies every possible interest  which a person can clearly hold or enjoy.

IV: Family Arrangement: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 C.I.T.  v.  R.  Ponnammal (1987)  164  ITR  706 (Mad)

Even if a party to the settlement had no title but, under the  family arrangement, the other party relinquishes all its claims  or titles in favour of such a person and acknowledges him to  be  the  sole  owner,  then  the  antecedent  title  must  be  assumed and the family arrangement will be upheld.

2 C.I.T. v. Shanti  Chandran (2000) 241 ITR  371 (Mad)

An asset  acquired by way of  a family  arrangement  to  be  considered  as  an  asset  acquired  on  partition  or  other  succession.

V: Law of Partnership: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 C.I.T.  v.  Palaniappa  Enterprises (1998)  234  ITR  635 (Mad)

Asset of partnership firm – transfer to partner by agreement –  not valid – registered deed necessary.

2 Saraladevi  Sarabhai v. C.I.T. (2001) 250 ITR  745 (Guj)

Contribution  of  capital  by  a  partner  to  a  firm  constitutes  “transfer”.

3 Sunil  Siddharthabhai v.  C.I.T.

Conversion of  an exclusive interest  into  a shared interest  would  amount  to  a  “transfer”  and  does  not  amount  to  a  conveyance by way of sale.

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(1985) 156 ITR  509 (SC)

4 C.I.T. v. S.  Rajamani and  Thangarajan  Industries (2000) 241 ITR  668 (Mad)

Transaction of a partner with the firm, during the subsistence  of  the  firm  requires  a  registered  instrument,  where  the  transaction involves immovable property.

5 Malabar  Fisheries v.  C.I.T. (1979) 120 ITR  49 (SC)

Distribution of  assets on dissolution is not transfer  by the  firm.

6 C.I.T. v. Gupta  Brothers (1981) 131 ITR  492 (All)

Validity of partnership – contribution of partner need not be  cash  or  property.   Skill  and  labor  would  constitute  contribution.

7 C.G.T. v. Pranay  Kr. Saharia (1993) 204 ITR  78 (Gau)

Minors who were admitted to the benefits of the partnership  could not claim their share of goodwill on the reconstruction  of the firm by excluding the minors and consequently they  were not liable to gift-tax.

8 Beniram  Moolchand v.  C.I.T. 25 ITR 287 (All)

The mere fact that two persons take a commission agency  business  jointly  would  not  necessarily  constitute  a  partnership between them.

9 C.I.T. v. Chandra  Shekhar Pawan  Kumar 203 ITR 435  (Raj.)

If a partnership has been entered between two persons of  whom one is a benamidar of the other, there is no relation of  partnership  between  the  two  persons  and  one  person  cannot constitute a firm.

10 Addl. C.I.T. v.  Mohanbhai  Pamabhai 165 ITR 166  (SC)

On retirement of a partner from the firm, there is no transfer  of interest of the partner I the assets thereof including the  goodwill.  The amount received is no assessable as capital  gains.   This  case  law  is  valid  even  after  amendment  in  Section  45(4)  which  talks  of  dissolution  or  otherwise  transferred.

11 Manohardas  Kedarnath v.  C.I.T. 25 ITR 287 (All)

It is open to the partners to agree not to take the whole of  the firm’s profits for their personal use and to reserve a part  of the firm’s profits for charity.

12 C.I.T. v. Bharani  Pictures (Mad) (1981) 129 ITR  244

A partner has no interest in the property of the firm.  In a  case where there are two partners 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.

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VI: Territoriality : Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 C.I.T.  v.  H.E.H.  Mir  Osman  Ali  Bahadur (1966)  59  ITR  666 (SC)

The  case  involved  international  law,  municipal  law  and  a  convenant between the Government of India and the Nizam  of Hyderabad.  Held, that Hyderabad State never acquired an  international personality under international law and its ruler  was  not  entitled  to  claim  immunity  from  taxation  of  his  income.

2 Electronics  Corporation of  India Ltd. v.  C.I.T. 183 ITR 43 (SC)

Legislative powers of Parliament to enact laws which have  provisions of having extra-territorial operation, is within the  competence  of  Parliament.   But  nexus  with  something  in  India or object relating to India necessary.

3 G.V.K. Industries  Ltd. v. I.T.O. 332 ITR 130  (SC)

Parliament  is  constitutionally  restricted  from  enacting  legislation with respect to extra-territorial aspects or causes  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 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.  

4 C.I.T. v. R.D.  Agarwal & Co. 56 ITR 20

Business connection – there must be continuity as well as  real and intimate relation between trading activity carried on  outside the taxable territories and trading activity within the  territories, the relation between the two contributing to the  earning of income by the nonresident in his trading activity.

VII: Trusts/ Societies: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 L.R. Patel Family  Trust v. I.T.O. 262  ITR  520  (Bom)

Trustees of a fixed (specific) trust cannot be considered as  an association of persons or body of individuals.

2 C.I.T. v. Thanthi  Trust (1982) 137 ITR  735 (Mad)

Discussion on the Doctrine of Cypres as applicable to public  charities.

3 C.I.T. v.  Swashraya 286 ITR 265  (Guj)

Power of trustees to contract on behalf of trust.  Consent of  beneficiaries, if necessary.

4 Pandit v. C.I.T. The number of ultimate beneficiaries of a trust may increase  

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(1972) 83 ITR  136 (Bom)  

or  decrease by reason of  death  and other  circumstances  and the interests of beneficiaries may, at a relevant date, be  only  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 determinate  and known and that assets are held by the trustees for their  benefit.

5 C.I.T. v. All India  Hindu  Mahasabha 140 ITR 748  (Del)

A  society  registered  under  the  Societies  Registration  Act  may be treated as an association of persons.

6 Tulsidas  Kilachand v.  C.I.T.  42 ITR 1 (SC)

India Trust Act, 1882 – trustee can also be a beneficiary.

7 C.I.T. v. P.  Bhandari (1984) 147 ITR  500 (Mad)

Trust  may be created  in  favour  of  an unborn  person if  it  satisfies conditions laid down in Section 13 of the Transfer of  Property  Act, 1882, even though coming into existence of  such a beneficiary is uncertain.  A trust deed cannot be bad  for uncertainty or vagueness.

VIII: Contract Law : Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 C.I.T. v. Shantilal  Pvt. Ltd. (1983)  144  ITR  57 (SC)

Nature of  breach – whether payment  of  damage results in  settlement of the original contract.

2 C.I.T. v. Best &  Co. P. Ltd. 60 ITR 11 (SC)

Compensation  received  on  termination  of  agency  and  restrictive convenant – nature of receipt – revenue or capital  – restrictive convenant – whether an independent obligation  – whether compensation severable.

3 N.  Sundareswaran  v. C.I.T. (1997) 226 ITR  142 (Ker)

Breach of contract – arbitration clause – scope of Section 73  – liquidated and unliquidated damages – no deduction can  be claimed on potential liability for damages.

IX: Transfer of Property Act : Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 Bansidhar  Sewabhogowan  

Difference between a sale  with  a  condition  to  re-purchase  and a mortgage by conditional sale.  

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& Co. v. C.I.T. (1996)  222  ITR  16 (Gau)

2 Jagadishchandra n v. C.I.T. 227 ITR 240  (SC) Arunachalam v.  C.I.T. 227 ITR 222(SC)

Whether  self-created  mortgage  or  mortgage  by  previous  owner affects the cost of acquisition.

3 C.I.T. v. Brig.  Kapil Mohan 252 ITR 830  (Del)

Though  a  transfer  cannot  be  made  directly  to  an  unborn  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  unborn  person  can only  be  made by the machinery of trusts.

4 C.G.T. v. Aloka  Lata Sett (1991) 190 ITR  556 (Cal)

If  two  registered  documents  re-executed  by  the  same  person  in  respect  of  the  same  property  to  two  different  persons at different times, the one which was executed first  has  priority  over  the  other,  although  the  former  was  registered  subsequent  to  the  latter.   In  other  words,  registration  of  a  document  relates  to  the  date  of  its  execution.  

5 C.I.T. v. N.R.  Bhusanraj (2002) 256 ITR  0340 (Mad)

Whether  a  sale  along  with  deed  for  re-conveyance  of  property amounts to transfer under both common law and  income-tax law?

X: Intellectual Property : Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 Anantram  v.  C.I.T. 5 ITR 511 (Lah)

The  assignment  of  a  patent  is  a  transaction  on  capital  account, but where a person carries on 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 income.

2 Mysore Elect. V.  C.I.T. 114 ITR 865  (Kar)

If  the  owner  gets  a  lump  sum  or  periodic  payment  for  imparting  the  know-how  to  others,  without  substantially  reducing its value 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  business  and the  imparting  is  no  more  than a business  service  of  however special kind.

3 Janki v. C.I.T. Royalties paid by a licensee for the right to take away earth  

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5 ITC 42 to  be  used  for  brick  making  or  extracting  saltpeter  are  income.  The fact that removal of the soil itself is involved  does not make the case any different from cases of royalties  on underground coal and quarries  

XI : Interpretation : Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 Prakash  Nath  Khanna v. C.I.T. (2004) 266 ITR 1  (SC)

The SC ruled that interpretation should avoid “the danger of a  prior  determination  of  the  meaning  with  one’s  own  preconceived notions”  and that the court  interprets the law  and cannot  legislate.   It  referred to two other  principles  of  construction,  one  relating  to  casus  omissus and  the  other  requiring a statute to be read as a whole.

2 I.T.A.T. vs. V.K.  Agarwal 235 ITR 175(SC)

Contempt of court – law applicable to ITAT.

3 C.I.T. v. Bhogilal  Mangilal 69 ITR 288 (Guj)

Spes Successionis – Transfer of Property Act dealt with.

4 Ellerman Lines  Ltd. v. C.I.T. (1971) 82 ITR  913 (SC) C.I.T. v. K.P.  Varghese (1981) 131 ITR  597 (SC)

Discusses the binding nature of CBDT’s instructions on the  revenue department.

XII :Miscellaneous: Sl.  No

Name and  citation of case

Allied subject/law adjudicated upon

1 Sree  Meenakshi  Mills v. C.I.T. 31 ITR 25 (SC)

Benami  –  meaning  and  effect  of  taxation  in  benamidars  hands discussed.

2 Leo Machado v.  C.I.T. 172 ITR 744  (Mad)

Boat belonging to the assessee met with an accident and  sank  in  high  seas;  the  compensation  received  from  insurance company was due to destruction of property, thus  no  “transfer”  as  contemplated  by  Section  45  read  with  Section  48.   The  insurance  amount  received  cannot  be  considered as consideration and amount received not liable  to capital gains tax.

3 Gangadhar Bera  v. Asst. C.I.T.  (2004) 190 ITR  

A  clarificatory  notice  is  a  mere  addendum to  the  original  notice and the effect of clarification is always retrospective  so it must relate to the original notice.  A mere non-mention  

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467 (Cal) of specific clause does not render notice bad in law. 4 C.I.T. v. Andhra  

Chamber of  Commerce 55 ITR 722 (SC)

The  expression  “charitable  purpose”  is  very  wide  in  its  amplitude.  The object need not benefit the whole mankind  or even all persons living in a particular country or province.  It  is sufficient if  the intention is to benefit  a section of the  public as distinguished from the specified individuals.

5 Deccan Wine &  General Stores v.  C.I.T. (1977) 106 ITR  111 (AP)

Explained  the difference  between ‘association  of  persons’  and ‘body of individuals’.

6 C.I.T. v.  Maharashtra  Sugar Mills Ltd. (1971) 82 ITR  452 (Bom)

What constitutes an agricultural activity? There must be cultivation of land in the strict sense of the  term meaning thereby tilling the land.

7 I.T.O. v. M.K.  Mohammed Kunhi (1968) 71 ITR 815  (SC)

Income Tax Appellate Tribunal has inherent power to grant  stay of collection taxes and proceedings.

8 C.I.T. v. Indira  Balakrishna (1960) 39 ITR  546 (SC)

Association  of  persons  –  when  persons  do  not  combine  together to produce income, they cannot be assessed as an  AOP.  Note – The law has been amended after 1.4.2002

9 C.I.T. v. H.H.  Maharani Usha  Devi 231 ITR 793  (MP)

Personal effects of a ruler (heirloom jewellery) is not taxable  upon its sale for a profit.

10 C.I.T. v. Bai  Shrinbhai Kooka 46 ITR 86 (SC)

When an person re-values his capital asset and credits his  capital account there is no gain for the purpose of taxation.  One  cannot  make  loss  or  profit  out  of  transactions  with  himself.

11 Dhakeswari  Cotton Mills v.  C.I.T. (1954) 26 ITR  775

Principles of Natural Justice set out almost for the first time –  locus classicus.

12 Chemsford Club  v. C.I.T. 243 ITR 89 (SC) C.I.T. v. Bankipur  Club Ltd. 226 ITR 97 (SC)  

Principle of mutuality applies to income from property.

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It is apparent from the compilation extracted hereinabove, that the Members of  

the NTT 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,  

Contract Law, Law relating to Transfer of Property, Law relating to Intellectual  

Property, Interpretation of Statutes, and other Miscellaneous Provisions of Law,  

from time to time.  The NTT besides the aforesaid statutes, will not only have to  

interpret the provisions of the three statutes, out of which appeals will be heard  

by  it,  but  will  also  have  to  examine  a  challenge  to  the  vires  of  statutory  

amendments made in the said provisions, from time to time.  They will also have  

to  determine  in  some  cases,  whether  the  provisions  relied  upon  had  a  

prospective or retrospective applicability.

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 of law”, it is difficult for us to appreciate the propriety of  

representation,  on  behalf  of  a  party  to  an  appeal,  through  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 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 Secretaries to  

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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.  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 unsustainable in law.

VI.  The constitutional validity of Sections 5, 6, 7, 8 and 13 of the NTT Act:

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.  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 Sections 5, 6, 7 and 8 of the NTT Act.   

80. We shall first examine the validity of Section 5 of the NTT Act.  The basis  

of  challenge  to  the  above  provision,  has  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  

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petitioners, Section 5(2) of the NTT Act mandates, that the NTT would ordinarily  

have  its  sittings  in  the  National  Capital  Territory  of  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 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 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  jurisdiction  in  an  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 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.  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),  

wherein it was held, that permanent benches needed to be established at the  

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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 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 the role of the Central Government in  

determining the sitting of benches of  the NTT.  The Central  Government  has  

been authorized to notify the area in relation to which each bench would exercise  

jurisdiction, to determine the constitution of the benches, and finally, to exercise  

the power of transfer of Members of one bench to another bench.  One cannot  

lose sight of the fact, that the Central Government will be a stakeholder in each  

and  every  appeal/case,  which  would  be  filed  before  the  NTT.   It  cannot,  

therefore, be appropriate to allow the Central Government to play any role, with  

reference to the places where the benches would be set up, the areas over which  

the benches would exercise jurisdiction, the composition and the constitution of  

the benches, as also, the transfer of the Members from one bench to another.  It  

would be inappropriate for the Central Government, to have any administrative  

dealings with the NTT 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 fairness of the Members of the NTT.  For the NTT  

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Act to be valid, the Chairperson and 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).   Vesting  of  the  power  of  

determining  the  jurisdiction,  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 place of  

posting.  An unsuitable/disadvantageous Chairperson 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 view, that Section 5 of the NTT Act is not  

sustainable  in  law,  as  it  does  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.

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 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  

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Appellate  Tribunal  for  at  least  5  years.   While  dealing  with  the  historical  

perspective,  with  reference  to  the  Income  Tax  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  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 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 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 the respective  

Appellate Tribunals, are also eligible for appointment as Members of the NTT,  

subject to their having 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?

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  

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Technical  Members  could  be  appointed  to  the  tribunals,  where  technical  

expertise is essential for disposal of matters, and not otherwise.  It has also 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  upon  the  

“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 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, 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.   

84. We have already noticed hereinabove, from data 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  

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Societies,  Contract  Law, Law relating to Transfer  of  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 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  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 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 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 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  

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Accountant Members and Technical Members have the stature and qualification  

possessed by judges of High Courts.   

86. It  was not  disputed,  that  the  NTT has  been created  to  handle  matters  

which were earlier within the appellate purview of the jurisdictional High Courts.  

We are accordingly satisfied, that the appointment of Accountant Members and  

Technical  Members  of  the Appellate  Tribunals  to the NTT,  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  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 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 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 been expressly taken away by the NTT 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 NTT Act vested with an aggrieved party, a remedy of appeal  

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against an order passed by the NTT, directly to the Supreme Court.  Section 24  

aforementioned is being extracted hereunder:

“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:

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 such time as it may deem fit.”

In view of the aforestated appellate remedy, from an order passed by the NTT  

directly to the Supreme Court,  there would hardly be any occasion, to raise a  

challenge on a tax matter, arising out of the provisions of the Income Tax Act, the  

Customs Act and the Excise Act, before a jurisdictional High Court.  Even though  

the  learned  Attorney  General  pointed  out,  that  the  power  of  “judicial  review”  

under Articles 226 and 227 of the 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 NTT would have  

to  be  on  the  same  parameters  as  judges  of  the  High  Courts.   Since  the  

appointments of the Chairperson/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  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.

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87. We would now deal with the submissions advanced by the learned counsel  

for the petitioners in respect of Section 7 of the NTT 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 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. 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,  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 been constituted as a replacement of High Courts.  

The NTT 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 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  

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which was being transferred to the tribunal.  Accordingly, if the jurisdiction of the  

High Courts is being transferred 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  

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 NTT, 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, whereby the Chairperson and Members of  

the  adjudicatory  body  are  selected.   This  would  also  be  violative  of  the  

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 attached) and to provide that persons holding the new judicial offices, should  

not be appointed in the manner and on the terms prescribed for appointment of  

Members of the judicature.  For all the reasons recorded hereinabove, we hereby  

declare Section 7 of the NTT Act, as unconstitutional.

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89. Insofar as the validity of Section 8 of the NTT 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 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  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 and Members of the NTT.  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.  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 of the NTT Act is unconstitutional.

90. Sections 5, 6, 7, 8 and 13 of the NTT 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 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  

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rendered otiose and worthless, and as such, the provisions of the NTT 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,  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  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.

(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.

(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 created.

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(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.   

(vi) Examined on the touchstone of conclusions (iii) and (iv) above, Sections 5,  

6, 7, 8 and 13 of the NTT Act (to the extent 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.

                     ………………………………...CJI.

               (R.M. LODHA)

               ……………………………….......J.                 (JAGDISH SINGH KHEHAR)

               ……………………………….......J.                 (J. CHELAMESWAR)

               ……………………………….......J.                 (A.K. SIKRI)

Note: The emphases supplied in all the quotations in the instant judgment, are  ours.

New Delhi, September 25, 2014.   

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REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION TRANSFERRED CASE (CIVIL) No. 150 of 2006

Madras Bar Association             ……Petitioner

Versus Union of India & Anr.            …..Respondents

WITH CIVIL APPEAL NO. 3850 OF 2006 CIVIL APPEAL NO. 3862 OF 2006 CIVIL APPEAL NO. 3881 OF 2006 CIVIL APPEAL NO. 3882 OF 2006 CIVIL APPEAL No. 4051 OF 2006 CIVIL APPEAL NO. 4052 OF 2006

WRIT PETITION (C) NO.621 OF 2007 TRANSFERRED CASE(C) NO.116 OF 2006 TRANSFERRED CASE (C) NO. 117 OF 2006 TRANSFERRED CASE (C) NO.118 OF 2006

WRIT PETITION (C) NO. 697 OF 2007

J U D G M E N T 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  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  

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impermissible for the legislature to divest superior 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-B 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 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.   

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.”

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:     

“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 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   

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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; 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 merely judgment; and must ultimately depend upon   the  aid  of  the  executive  arm  even  for  the  efficacy  of  its   judgments.

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   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 of justice, the general liberty of the people can   never be endangered from that quarter,  I mean so long as the   judiciary remains truly distinct from both the legislature and   the  Executive.  For  I  agree,  that  “there  is  no  liberty,  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 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 continual jeopardy of being   overpowered, awed, or influenced by its co-ordinate branches;   and that as nothing can contribute so much to its firmness and   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)

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,  

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therefore, been placed before this Constitution Bench.  Following upon the  

heels of the judgment in  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 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   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 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  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  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:  Provided that separate form of memorandum of appeal shall be   filed for matters involving direct and indirect taxes:  Provided further that the National Tax Tribunal may entertain   the appeal within sixty days after the expiry of the said period of   

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one hundred and twenty days, if it is satisfied that the 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;   and  (b) may also determine any relevant issue in connection with the   question so formulated-  (i)  which  has  not  been  so  determined  by  the  Income-tax   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  law  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 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 such tax or duty payable on the   basis of the order appealed against:  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  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   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   

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appeal within the said period, allow it to be filed within 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, 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 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 of judiciary from executive: The State 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 Court with original jurisdiction  

in disputes arising between the Government of India and the States. Art. 132  

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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 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 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 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 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  

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highlighted  by  Art.  368  proviso  which  allows  an  amendment  of  all  the  

aforesaid Articles only if such amendment 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 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 may do any of the following things, that is   to say.- (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 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: 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.”

 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.   

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“(1)Every  High  Court  shall  have  superintendence  over  all   courts  in  India  for  the  time  being  subject  to  its  appellate   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; (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:  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 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  Court (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 (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 (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 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 Governor

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(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.”

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.  stated the  

High Courts power under Art. 227:

“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  Courts   within the bounds of their authority and not for correcting 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  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 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 of  

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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   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 Art. 226, it has a plenary power to issue orders or writs   for the enforcement of the fundamental rights and for any other   purpose to any person or authority,  including in appropriate   cases any Government, within its territorial jurisdiction. Under   Art.  227  it  has  jurisdiction  over  all  courts  and  tribunals   throughout  the  territories  in  relation  to  which  it  exercise   jurisdiction. It would be anomalous to suggest 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 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  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 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  

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emphatically  the  province  of  the  superior  judiciary  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 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,  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  for   discussion of alternative views.  If the question is settled by the   highest  Court  or  the  general  principles  to  be  applied  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 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 questions  be decided correctly.  Interestingly enough, our attention has  

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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 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, 1908 (5 of 1908):  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.  (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 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, entertain any 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  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   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.  (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:  Provided that the Supreme Court may entertain the appeal after   the expiry of the said period of ninety days, if it is satisfied that   

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the appellant was prevented by sufficient cause from preferring   the appeal in time.  (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 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:  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.  (v) Companies Act, 1956 Section  10GF.  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 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  sufficient  cause  from  filing  the   appeal  within  the  said  period,  allow  it  to  be  filed  within  a   further period not exceeding sixty days.”  

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) “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 on any of the   following grounds, namely:

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(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; (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.  (2) An appeal may lie under this section from an appellate   decree passed ex-parte. Section 100 (After amendment) 100. Second appeal (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 subordinate to the High Court, if the High Court   is satisfied that the case involves a substantial question of law. (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. (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   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   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 traditionally, such questions  

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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 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 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 answering this question, this Court made an observation that so long as an  

appeal  is  provided to the Supreme Court  from the orders of the appellate  

tribunal, the Act would be constitutionally valid.  This Court while deciding  

whether Saraf’s 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  

High Court on a statement of case made to it to decide a question of law  

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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 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   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  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 law 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 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 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 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 application presented within the time   specified in sub- section (1).

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(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, or,   as the case may be, the 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 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 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. 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  up  a   statement of the case and refer it through the President direct   to the Supreme Court. 35I. 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 to it   are  sufficient  to  enable  it  to  determine  the  questions  raised   thereby,  the Court  may refer  the case back to the 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. (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. (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   

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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 it. 35K. Decision of  High Court  or  Supreme Court  on the  case   stated. (1) The High Court  or the Supreme Court  hearing any such   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  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. 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   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  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 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  

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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  

decision was completely different and the decision did not advert to Sections  

35G to 35L as they then stood.  

24. Art. 323B 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  undone  by  the  constitution  44 th  

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 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 the High Courts’ superintendence, if they were  

also subject to its appellate jurisdiction. As stated above, the 44 th Amendment  

undid this and restored sub-clause (1) to its original position.

26. However,  Art.  323B continues  as  part  of  the  constitution.  The real  

reason for the insertion of the said article was the same as the amendment  

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made to Art. 227 – the removal of the High Courts’ supervisory jurisdiction  

over tribunals.  L. Chandra Kumar v.Union of India (1997) 3 SCC 261,  

undid the very raison d’etre  of  Article 323B by restoring the supervisory  

jurisdiction of the High Courts so that a reference to Article 323B would no  

longer be necessary as the legislative competence to make a law relating to  

tribunals would in any case be traceable to Entries 77 to79, 95 of List I, Entry  

65 of List  II and Entry 11A and 46 of List  III  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:

“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 higher judiciary, incorporated important 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  of  judicial  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.  The inclusion of   such elaborate provisions appears to have been occasioned by   

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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 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  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 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 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 and the Supreme Court to   test  the  constitutional  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   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)

 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  

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this duty, they cannot act as substitutes for the High Courts and   the Supreme Court 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.”(see Para 93)

28. The stage is now set for the Attorney General’s reliance 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 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 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 and jurisdiction of courts are 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 High Courts   can  be  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 enactments and   

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confer  jurisdiction  on  them  to  decide  disputes  in  regard  to   matters  arising  from  such  special  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: “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.  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.  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 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  enactments.   Therefore,  when  transferring  the  jurisdiction  exercised  by   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 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 92)

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In paragraphs 101 and 102 the law is stated thus: “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  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  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.

The fundamental right to equality before law and equal   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 recognized 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 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 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  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 original stage.  It  is  

significant to note that the first appeal provided to the appellate tribunal is not  

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restricted only to questions of law. It is a full first appeal as understood in the  

section 96 CPC sense – (See section 10FQ of the Companies Act). A further  

appeal  is  provided  to  the  Supreme  Court  under  Section  10GF  only  on  

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 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 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  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:

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“II-6.10.  In paragraph 11.30 of  our Interim Report,  we had   expressed the view that  the Government  should consider  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.   II-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  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 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 to manageable proportions at any time in, the future, but,   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 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 hand, it has worsened.  In this connection, it would be   worth  noting  that  the  Wanchoo  Committee  considered  an   alternative course  for dealing with this  problem through the   establishment of a Tax Court but 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  attention  to  this  matter  in  the  context  of  the   mounting arrears of tax cases before the courts.  

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II-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 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 all levels,  with adverse consequences   on their efficiency.  According to the figures 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. II-6.13.    Apart  from  the  delays  which  are  inherent  in  the   existing 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.   The decision of one High 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.  II-6.14.   Tax  litigation  is  currently  handled  by  different   Benches of  the High Courts  constituted on an ad hoc basis.   The absence of permanent benches also accounts for the delay   in the disposal of the tax cases by High Courts.  II-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.  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   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  turn  will  reduce  the  volume  of   litigation  going  up  before  the  Tax  Court  as  well.   Once  a   Central Tax Court is established, the judges appointed to the   

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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. II-6.16.      In  the  light  of  the  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 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,  consider  the   desirability  of  constituting  special  Tax  benches  in  the  High   Courts  to  deal  with  the  large  number  of  Tax  cases  by   continuously  sitting  throughout  the  year.   The  Judges  to  be   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.  II-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   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 Court judges.  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   judges. II-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,   such a question cannot arise out of the order of the Tribunal   and  cannot be made the subject matter of a reference to the   

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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 authority or the   Tribunal cannot decide upon the validity or vires of the other   provisions of the law.  We recommend 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.   II-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 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 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 of the Tribunal’s order.   The hearing of such application by the Tribunal, followed by   the drawing up of 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 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, before   the relief, if any due, can be granted to the assessee.  II-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,   accordingly,  recommend  that  the  jurisdiction  of  the  Central   

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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 Tax   Court unless it is contrary to a decision of the Supreme Court   or of a full Bench of the Tax Court.  II-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 or respondents to argue the appeals before it.  Legal   practitioners would, in any event, be entitled to appear before   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.  II-6.22.        Our recommendation for setting up of a Central   Tax Court may not be interpreted to be only a modified version   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   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.” 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, 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 for offences.  It is therefore not correct to say that  

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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 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 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 Supreme 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  

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  

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private persons, being 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 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 over the Quebec  

Transport  Commission.  The  tribunal  performed  no  function  other  than  

deciding questions 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 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   Residential Tenancy Commission to make eviction orders and   compliance  orders  as  provided  in  the  Residential  Tenancies   Act, 1979. The importance of the issue is reflected in the fact   that five Judges of the Court, including the Chief Justice and   Associate Chief Justice, sat on the appeal.”

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It then went on to enunciate a three steps test with which we are  not  

directly concerned. The Court finally concluded:

“Implicit throughout the argument advanced on behalf of the   Attorney-General of Qntario is the assumption that the Court   system is too cumbersome, too expensive and therefore unable   to respond properly to the social needs which the residential   Tenancies Act, 1979 is intended to meet.  All statutes respond   to social needs.  The Courts are unfamiliar with equity and the   concept  of  fairness,  justice,  convenience,  reasonableness.   Since  the  enactment  in1976  of  the  legislation  assuring   “security of tenure” the Country Court Judges of Ontario have   been  dealing  with  matters  arising  out  of  that  legislation,   apparently  with  reasonable  dispatch,  as  both  landlords  and   tenants 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   also 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   arguments advanced in support of a view that s.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  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  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  

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Courts Act, 1974 was passed 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   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   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 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   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 (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 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  constitutions  are  primarily  concerned  not  with  the   

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legislature, the executive and the judicatures 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 method of 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  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  other  judges  or  with  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 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   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   jurisdiction  conferred  on  them  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 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).”

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35. Ultimately,  a majority of  the court  found that  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  were  

unconstitutional.

36. It  was  also  argued  by  the  learned  Attorney  General  that  the  High  

Courts’ jurisdiction under Section 260A of the Income 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 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.

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  of  judicial  superintendence  of  the  High  Court  under   Article  227.  Direct  appeal  to  the  Supreme  Court  from  the   decisions of a tribunal of first instance is an acceptable form of   

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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 does not exercise its   power of judicial 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 law as   a court of law i.e. the Supreme Court continues to be the final   interpreter of the law. By the 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  226/227   would still be available if the tribunal exceeds its jurisdiction   or  violates the principles of natural justice or commits such   other transgressions. 21.  (a)  The  present  Act  provides  ample  scope  for  judicial   scrutiny in the form of an Appeal under Section 24 of the Act   and also under Articles 226/227, 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 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 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. In fact,  the   importance  of  separation  of  powers  in  our  system  of   governance  was  recognised  in  Special  Reference  No.  1  of   

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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   Kerala [(1973)  4  SCC  225]  ,  wherein  while  finding  certain   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 SCC 1] and in a series of other cases on the   point. Nevertheless, apart from the fact that our Constitution   does  not  envisage  a  rigid  and  strict  separation  of  powers   between the said three organs of the State, the power of judicial   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 amendment. (See L. Chandra  Kumar v. Union of India [(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 and entering the constitutional limitations as an ultimate   interpreter of the Constitution.” “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 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 III and other parts of 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   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 “the   

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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   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  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.    

………………………………..J. (R.F. Nariman)

New Delhi, September 25, 2014

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ITEM NO.1A               COURT NO.1               SECTION XVIA (For Judgment)                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Transfer Case (Civil)  No(s).  150/2006 MADRAS BAR ASSOCIATION                             Petitioner(s)                                 VERSUS UNION OF INDIA & ANR.                              Respondent(s) WITH C.A. No. 3850/2006  C.A. No. 3862/2006  C.A. No. 3881/2006  C.A. No. 3882/2006  C.A. No. 4051/2006  C.A. No. 4052/2006  T.C.(C) No. 116/2006  T.C.(C) No. 117/2006  T.C.(C) No. 118/2006  W.P.(C) No. 621/2007  W.P.(C) No. 697/2007   Date : 25/09/2014 These matters were called on for Judgment today.   For Petitioner(s)  Mr. Mukul Rohatgi, Attorney General’s

Mr. Arijit Prasad, Adv.  Mr. B. V. Balaram Das,Adv.

                    Mr. Nikhil Nayyar,Adv.                                            Mr. P. Parmeswaran,Adv.                      

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                    Mr. D. S. Mahra,Adv.                      Mr. K. C. Dua,Adv.                      Mr. Shibashish Misra,Adv.                      Mr. Rustom B. Hathikhanawala,Adv.                      Mr. E. C. Vidya Sagar,Adv.

Mr. Pramod Dayal, Adv. For Respondent(s)  Mr. P. Parmeswaran,Adv.                                            Mr. Ardhendumauli Kumar Prasad,Adv

Mr. Aviral Shukla, Adv.  Mr. Amit A. Pai, Adv.  Ms. Pankhuri Bhardwaj, Adv.  Mr. Nitesh Ranjan, Adv.

                    M/s. Parekh & Co.                       Mr. Pramod Dayal,Adv.

Mr. K.C. Dua, Adv.  Mr. Nikhil Nayyar, Adv.  Mr. Satya Mitra Garg, Adv.  Mr. Rustom B. Hathikhanawala,Adv.  Mr. B. Krishna Prasad, Adv.  Mr. Ajay Pal, Adv.    Mr. Parmanand Gaur, Adv.

 Hon'ble Mr. Justice Jagdish Singh Khehar pronounced  the  Judgment  on  behalf  of  Hon'ble  the  Chief  Justice,  His  Lordship, Hon'ble Mr. Justice J. Chelameswar and   Hon'ble Mr.  Justice A.K. Sikri.

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Hon'ble Mr. Justice Rohinton Fali Nariman pronounced a  separate Judgment concurring in the result.

All  matters  are  disposed  of  in  terms  of  reportable  Judgments.

(RAJESH DHAM) (RENU DIWAN) COURT MASTER COURT MASTER  

  (two signed reportable Judgments are placed on the file)

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