Senior Advocate Arvind Datar, for the Association, indicated sub-section (11) of section 184 of the Finance Act, 2017, which has come to be introduced by virtue of the impugned Ordinance, and which he called the "most contentious" and the "most curious" of all the grounds of challenge.
The said provision stipulates that notwithstanding anything contained in any judgment, order, or decree of any court or any law for the time being in force, (i) the Chairperson of a Tribunal shall hold office for a term of four years or till he attains the age of seventy years, whichever is earlier; and (ii) the Member of a Tribunal shall hold office for a term of four years or till he attains the age of sixty- seven years, whichever is earlier. The proviso to the sub-section lay down that where a Chairperson or Member is appointed between May 26, 2017 and the notified date of the Ordinance, being April 4, 2021, and the term of his office or the age of retirement specified is greater, then, the term of office or age of retirement or both, shall be as specified in his order of appointment subject to a maximum term of office of five years.
"In view of the non obstante clause, it is not clear which judgement of the Supreme Court is sought to be overruled. Right from Sampath Kumar to the 2010 Madras Bar Association case to Roger Mathews in 2019 to the November, 2020 judgment (on the challenge to the 2020 Tribunal Rules), Your Lordships have said that the tenure is to be 5 years. Can it be 4 years now? You have a law in 2017 overruling the judgements which are to come in 2020? That is impermissible. All Your Lordships' directions are being set at naught but this retrospective amendment", argued Mr. Datar.
Further, the senior advocate pointed out that all interim orders in Kudrat Sandhu's case (passed pending the challenge to the 2017 Tribunal Rules; directing that the appointment to the tribunals shall be as per the Parent Act and Rules and hence the tenure is to be determined as per the old statute), will be deemed to have been made on the presumption that sub-section (11) was in existence then. "By virtue of the provision of 4 years or uptil 67 or 70, (11) put a cap on the tenure in 2017 itself! So all interim orders are non-est now!", elaborated Mr Datar.
"This is an act of legislatively overruling Your Lordships' decision. This has to be struck down", pressed Mr Datar.
Justice Rao pointed out that there is permissible legislative overruling and there is non-permissible.
"Permissible legislative overruling is a misnomer as only the basis of the judgment can be removed. A court's decision must always bind unless the principles on which it is delivered is not justified and the decision is not capable of being implemented. In the instant case, there has been impermissible legislative overruling. If Your Lordships have said that the Search cum Selection Committee is to have 2 judges and 2 secretaries with the casting vote to the CJI, and they say that the committee will have 4 secretaries and two judges, will it be permissible?", replied Mr. Datar.
"In our November 2020 judgement, we said the 2020 Rules cannot come in with retrospective effect and that all appointments made before shall be governed by the parent Act. To overrule this, they have introduced sub-section (11) from 2017. Now the Union of India will say that because of this, Kudrat Sandhu and the November 2020 judgement stands overruled", remarked Justice Gupta.
"That is what retrospectivity is- All appointments between May 26, 2017 till the notified date in 2021. It is a well-known jurisprudence in tax law also that there is always power to legislate with retrospective effect...The notified date is April 4 and its applicability is retrospective from 26 May 2017. We can't physically go back to 2017 and turn back the clock. We have to see the position on April 4 to find out if it is a valid law", continued the judge.
However, Mr Datar insisted that the bench has to "sit in a time machine and go back" –" The tenure is up to the age of 62 years or 5 years, whichever is earlier, for certain tribunals like the CESTAT. That was the law in 2017. In Kudrat Sandhu, it was directed that all the selections made and the consequential appointment of all the selectees (pending the challenge to the 2017 Tribunal Rules) as shall be for a period as has been provided in the old Acts and the Rules... These directions are now deemed to have been passed when sub-section (11) was already in existence. Sub-section (11) says that one cannot have a tenure of more than 4 years and any appointment of more than 4 years shall be deemed to be only four"
"Assuming that in, the 2017 law said 4 years, it is now open to the Union of India to waive this requirement by agreeing to the old Acts and Rules. The Union of India should not be allowed to disturb the existing position by this retrospective amendment. Even if Your Lordships uphold the retrospective amendment, the appointment to certain tribunals like the ITAT and the CESTAT will be for 5 and not 5 years", continued Mr. Datar.
Justice Bhat observed, "We are dealing with two points of time with two different fact-situations. (11) is deemed to come in from 2017. The occasion would be different if the Proviso did not exist. Yet the Proviso comes in. The Proviso recognises implicitly that there are members who have been appointed for 5 years. The full effect of (11) is that it substitutes 5 years with 4 years. But they sought to preserve what had been done originally. The Parliament recognises that there is another law under which appointments have been made and we are preserving it"
"The deeming fiction is brought in from 2017. As on that date, sub-sections (1) and (2) of section 184 spoke of a tenure of 5 years. Now it has been said that even sub-section (11) will be deemed to have come into force from 2017. The non-obstante clause in sub-section (11) indicates that the tenure is 5 years plus the age limit. So whatever appointments were made in between, they have been preserved", explained the judge.
On Wednesday, the bench had asked whether, by passing an Act or Rules or an Ordinance, the Legislature and the Executive can tinker with directions of the court under Article 142; whether, when considering an issue of policy, the Parliament is competent to make a law and deter the court's directions. The question was if the directions of the Supreme Court of India in Sampath Kumar, R. Gandhi, Rojer Mathews and the Madras Bar cases as regards the tenure, age, panel, SCSC etc could be said to be 'constitutional rules' to the extent that they cannot be overruled by legislation.
Justice Bhat explained that a particular classification may be bad for X, Y, Z reasons, but if it does not go to the root of the constitutional aspect, the law can be valid if the classification is corrected. If there is an inherent vice in the classification, that there is no differentia at all- if it is said that the five-year tenure security goes to the root of the separation of powers and ensures independence –then there is no curing effect.
Mr. Datar replied that the directions of the Supreme Court of India in Sampath Kumar, R. Gandhi, Rojer Mathews and the Madras Bar cases as regards the tenure, age, panel, SCSC etc could be said to be 'constitutional rules' to the extent that they cannot be overruled by legislation.
"Once you take away the judicial power vested with the Executive and create quasi-judicial tribunals, there are limitations on the Parliament also. What Your Lordships have mandated are not 142 directions. These are principles culled out not from one Article- There is a mention of tribunals in the Constitution under Entry 11 of Concurrent List which talks of administration of justice. Today, there are 1100 High Court judges and 475 tribunal members. A very large part of the justice delivery system is through tribunals. So administration of justice is taking place through tribunals. Once Tribunals are a part of the justice delivery system, then Entry 11, Article 50 (separation of Executive from the Judiciary) and Article 141 (law declared by the SC to be binding on all courts) cover Your Lordships' directions. Directions of Sampath Kumar, R. Gandhi and others as regards tenure of 5 years, etc are not 142 directions. These are the DNA of the building blocks of tribunals!", submitted Mr. Datar.
The main points raised in the petition by the Madras Bar Association are: The Ordinance fixes a minimum age limit of 50 years for appointment as Tribunal Members; it fixes their term as 4 years as against the 5 required by the SC; it has re-introduced the idea of a panel of two names being recommended by the Search Cum Selection Committee (SCSC); it dilutes the SC direction by saying that the Central Government should make appointments "preferably within 3 months"; etc.
"The Union of India is saying that everything is in the legislative domain, that all the decisions of the Supreme Court from Sampath Kumar onwards have misunderstood the scope of judicial review. I had really thought that the dust would settle after the November 2020 judgement but it appears that we are back to square one virtually", argued Mr. Datar.
Minimum Age Limit of 50 years; 4 year tenure
In as much as the first proviso to section 184(1) of the Finance Act provides that a person who has not completed the age of fifty years shall not be eligible for appointment as a Chairperson or Member, Mr. Datar argued that it is a direct attempt to override the Supreme Court judgement of November 27, 2020 which held that for a judicial member, 10 years experience as an advocate is enough prerequisite. At this, Justice Gupta pointed out that the ten-year requirement has not been done away with in the impugned ordinance – "In addition to that, the age can be fixed. As per section 413 of the Companies Act, for appointment to the NCLT, the age limit of 50 years is there. This is not challenged by the Madras Bar Association in 2015 (before the five-judge bench where the Companies Act, 2013 provisions relating to the structure and constitution of NCLT and NCLAT, qualifications for appointment of President/Chairperson and Members and also the constitution of the Selection Committee was challenged)"
"It is 50 in only the NCLT, not everywhere. In the Administrative Tribunals Act, the eligibility is only that one has been or is qualified to be appointed as a High Court judge. Even in the ITAT and the CESTAT, the only qualification required is 10 years' experience as an advocate for a judicial member or eligibility of a High Court judge. The Attorney General has said that if only the requirement of 10 years is there, an advocate at the age of 33 can become a member. But if you put 50, there is difficulty in recruiting good members. Ultimately, the objective is to select the best possible candidate", replied Mr Datar.
As regards Justice Gupta's observation that the age limit of 50 did not come to be challenged in the second NCLT case in which the judgement was delivered by Justice AK Sikri in 2015, Mr. Datar argued that if the said condition had been challenged and upheld in the 2015 case, the Madras bar Association would have no case now.
"But if an argument is available to be raised and it is not raised, then the provision is to be held to be good law", observed Justice Gupta. "If there was a ratio decidendi of the court in the second NCLT case that the 50 year age limit is valid, we would have no legs to stand on. But since it was not challenged, there is no judgement on that point. There is no estoppel towards challenging it now", pressed Mr Datar.
The senior counsel continued to advance that once the court had held in its 2020 judgement that a prerequisite for the minimum practice of 25 years is not correct, it was not open to the Parliament to overrule the same by bringing in the 50 year age limit.
At this, Justice Gupta observed that by the 2020 judgement, advocates who had been excluded from being appointed as members of tribunals all along were made eligible and that 25 years was not a condition of the Rules but only an argument of the AG. Justice Bhat pointed out that advocates had been excluded from 12 tribunals and for the remaining 7, the 25 years was the limit. He indicated that the exclusion of the advocates and the practice requirement limit had been introduced for the first time in 2020.
"Your Lordships said that the 25 years limit would be an impediment for the younger advocates. Even the reappointment is subject to selection. Your Lordships said that the person would be 48 when he is considered eligible for appointment. So for the government to make the age limit as 50 now, without any reassurance of reappointment, is… Is the age limit of 50 years to subserve the interest of the tribunal or impede good people from joining?", argued Mr Datar. He asked if any chartered accountants, after 30 years of practice, would leave their practice to become a member in a tribunal for 5 years.
At this, Justice Gupta commented in a lighter vein, "You can't make this argument before this bench. That was when Justice Rao had left his practice". "But Justice Rao does not have a tenure of three or four years", quipped Justice Bhat. "Supreme Court judges stand on an altogether different footing. They, anyway, cannot plead before any court, they can only participate in arbitration, once they have held office. So they have to decide and take a call accordingly", remarked Mr Datar.
"What is the logic of 4 years, unless they want to say that whatever the Court may say, we will have the last word? If NCLT can have 5, why must the others have 4? Why not make it 1 year only? They might as well then make appointments on a contractual basis! Justice Bhagwati in 1987 said when you appoint a tribunal member, he will dispense justice. He said that five years is a good term. He can't effectively do justice otherwise. Same thing was said in R. Gandhi and in November, 2020!", advanced Mr. Datar.
Mr. Datar argued that the stand of the Union of India is that legislation is their domain and they can decide what should be the tenure etc- "That is the misconception. When you talk of separation of powers, you don't talk of legislative power. Once you give judicial power to the tribunal, what was decided by the High Courts is now being decided by the Intellectual Property Tribunal, the NCLT. Nowhere is the word 'lis' between the two private parties referred to"
Housing Rent Allowance
The second argument raised by Mr Datar was in context of the second proviso to section 184(1) which deals with housing rent allowance –"The AG has now submitted that for class X cities, the HRA would be Rs.60,000, for class Y, it would be 40,000 and for class Z cities, it would be lesser. Except for the Armed Forces Tribunals, almost all others are in class X cities. So a High Court or a Supreme Court judge, who is supposed to head a tribunal in cities like Delhi, Chennai or Bombay, is expected to survive on an HRA of 60,000?"
He submitted that the sad state of affairs is that because of this, for a tribunal in Delhi, the candidates being chosen are Delhi-based persons as they already have a house in Delhi. For the ITAT in Chennai, the selections are being made looking at a Chennai-based High Court judge. "That is why Your Lordships made a calculation of 1,25,000 and 1,50,000 (for the members and the Chairman respectively in the November 2020 decision).
"The Union of India is now saying that don't keep it as 1 lakh 25 or 1 lakh 50 and that it should be made double of the HRA of the government of India employees of secretary rank", continued Mr Datar. It may be noted that in his turn, AG KK Venugopal clarified that the HRA is equivalent to that of a secretary to the government of India or a Cabinet Secretary, who is the topmost bureaucrat, and that the double of that HRA was his suggestion which was not accepted.
"I am not saying that the tribunal members should be at par with the High Court or Supreme Court judges. But how does a judge come from any other city to Delhi and live on 60,000? Are we trying to promote the tribunals or defeat them? If the tribunals are to be independent, there must be members whose at least housing requirements are taken care of! 90% of the tribunals are in Delhi!", pressed Mr Datar. Justice Bhat noted that even the sum of Rs.60,000 would be taxable.
"Your Lordships directions are mandatory. They cannot be overruled. Once it is said that you have to give 1,50,000, they wanted to change it to 2 times the HRA. The whole purpose is- can a judge from another state who is supposed to be a chairperson in Delhi not have the facility to discharge his functions? The point is not that the Secretary gets this much", argued Mr. Datar.
Justice Bhat canvassed the All India Judges Association case- "Why did this court have to bother itself with the conditions of services of subordinate judiciary, that they have libraries at their houses, they get pooled cars and don't have to travel by buses, some perquisites were made available to them other than housing. Now we are dealing with people who have the power to hang someone. Let's not forget district judges have capital punishment power. He is part of the court system"
"But the tribunal is also part of the court system- at the taxation level or regulatory regime. They deal with huge matters. These regulatory matters are not between two private agencies but between the government agencies and citizens. Roger Mathew said that tribunal members cannot be equated with High Court judges. But can they be equated with secretaries? Are they holding civil posts? Are they in any civil service? No. If we keep these two extremes apart, what are they doing? There are discharging judicial functions of the State, so this is another wing of the State", continued the judge.
2-member panel recommended by the Selection Committee
The third contention raised by Mr Datar was as regards the attempt of the government of India to re-introduce vide its 2021 ordinance the provision for a panel to comprise of two nominees which is recommended by the search cum selection committee (SCSC) to the government. It may be noted that the Rule was impugned in the 2020 judgement provided for a panel of three members and the Supreme Court has held that any panel recommended by the SCSC should comprise only one candidate.
"Your Lordships said that once the SCSC selects the candidate, he has to be appointed. Earlier, the rule provided for three nominees per post and now the government has statutorily required the SCSC to recommend two of which it will select one. The AG has offered as an explanation that in case there is an adverse IB report for one, the government could choose the other. But the SCSC comprises two Supreme Court judges and two senior secretaries who nominating persons. This is not a tender process where if there is a problem with L1, the government would go to L2", it was argued.
"WE HAD SAID THAT ONE PERSON CAN BE WAITLISTED", POINTED OUT Justice Rao.
"YES, BUT would GOOD HIGH COURT JUDGES WANT TO COME THEN? Your Lordships SAID RECOMMEND ONE NAME AND ONE CAN BE WAITLISTED. But it was said that THE NAME WHICH IS RECOMMENDED HAS TO BE APPOINTED. THERE IS NO QUESTION OF THE GOVERNMENT PICKING AND CHOOSING. THERE IS A DIRECT ATTEMPT TO OVERRULE the mandate that ONCE THE SCSC HEADED BY the Chief Justice of India and comprising two secretaries has decided, it is the committee which is to have the final word. It was the ratio of your judgement that three names are bad. So how would two names be good? And it is the Executive which would have the final say in the appointment of a judicial body! What about the separation of powers then?", advanced Mr. Datar.
He pointed out that the SC comprises two judges and two secretaries and so there is no question of the representation of the government not being equal.
"Further, Your Lordships had directed that the appointment will be made within three months of the recommendation. Now this direction has been diluted to mean that the government shall 'take a decision' and that too 'preferably within three months'. Like Prime Minister Narsimha Rao said that not taking a decision is also a decision. Once you have a tribunal, which performs quasi-judicial functions, it cannot be headless for months!", continued Mr. Datar.
Justice Gupta pointed out, "It is a precondition that the integrity of a candidate be checked before its recommendation by the SCSC, as it is done in the case of a High Court judge. The SCSC may have no knowledge of his background or antecedents"
In response, Mr. Datar indicated that in the recent judgement of the Supreme Court for appointment of ad hoc judges under Article 224A, the Union of India had submitted that the entire IB process all over again for a person who has already been a High Court judge can be omitted.
"In the tribunals, it is not just High Court judges, but also technical members and other members of the bar", pointed out Justice Gupta.
Justices Gupta and Bhat proceeded to suggest that an application may be invited beforehand and a preliminary screening may be carried out by the SCSC as to who to shortlist. Based on this, the IB report is sought and then the recommendation is made.
"I am telling you from practical experience, that even before we shortlist three names, the Secretaries would ask for the IB report. For TDSAT, we shortlisted three and even before we had done that, the IB process was done. We had interviewed 60 candidates and shortlisted 6. After the IB report came, we sent 3 names", concurred Justice Rao. The judge said that there is merit in what Justice Gupta has said.
"This is a wholesome suggestion", agreed Mr. Datar.