Supreme Court To Examine NCLT Bar Association's Locus To Challenge 3-Year Term For Members

The Supreme Court on Monday said that it will examine the locus standi of the National Company Law Tribunal Bar Association in challenging the Centre's notification fixing the term of 23 NCLT members appointed in 2019 as 3 years instead of 5 years.

A vacation bench comprising Justices CT Ravikumar and Sudhanshu Dhulia adjourned the writ petition filed by the NCLT Bar Association observing that the locus standi of the petitioner is the first issue to be considered in the matter. The bench noted that none of the members, who accepted the appointments based on the 3 year term with "wide eyes", have challenged the notification. The issue whether the members can continue beyond the term of three years can be decided in the writ petition if the issue of locus is answered in favour of the petitioner, the bench noted in the order.

The matter will be considered next on July 20 on consent of the petitioner and the Union Government.

The Association has challenged the notification issued by the Ministry of Corporate Affairs on 20.09.2019 as per which the term of 23 members was fixed as 3 years or till the age of 65 years, whichever is earlier. It argues that the said notification is contrary to the Sec. 413 of the Companies Act, 2013 which prescribes the term of the members for 5 years. Further, it says that in the Madras Bar Association judgment (2021), the Supreme Court has held that the term of Tribunal members should be 5 year and observed that a longer term was necessary to ensure independence.

When the matter was taken, the bench asked the petitioner about the locus to make the challenge, especially so when none of the appointees have approached the Court.

"Suppose if any one of the appointees approached the court in 2022, after accepting the order of appointment, definitely our question would have been- you accepted the notification of 3 years with open eyes, without any demur. Those persons have not challenged, now the bar association has filed in 2022, when persons were appointed in 2019, after accepting the notification with open eyes. Now when their term is about to end, we cannot hear at the instance of someone else.."

"They were issued the letter of appointment and they knew that they would be appointed for 3 years and they opted for it. Till date those appointees did not challenge that", Justice Ravikumar added.

Senior Advocate VK Chaudhary appearing for the Association submitted that all the members have given representations. Justice Ravikuar replied that mere giving of representation will not create any rights.

The Association's counsel submitted that their concern was regarding the "collapse" of the Tribunal if so many members are allowed to demit office. He informed that out of the 23, the Centre has given two year extension to 8 members, leaving out 15 members and alleged that it amounted to "cherry-picking".

"This is the tribunal which has stopped the entire banking system from collapse. This tribunal has recovered lakhs of crores. The total sanctioned strength is 63 members and it is supposed to sit in 28 benches across the country. But it is functioning only with 45 members in 19 benches. If retirement of 15 members is permitted in July, it will bring down the strength to 30, which will be less than half the sanctioned strength. Looking on day to day working, that there's so much pressure on the Tribunals. The cases of companies are not being taken up", the counsel submitted.

The petitioner also referred to an order passed by another bench extending the members of CAT members in a petition filed by the CAT Bar Association.

The bench said that it cannot pass a blanket order of extension, as the second limb of Section 413 of the Companies Act prescribes an upper age limit of 65 years for members. Therefore, the individual age of the members has to be ascertained. 

The bench further said that the order in the CAT Bar Association case was passed invoking Article 142 and hence it cannot be treated as a precedent.

The counsel submitted that the statutory prescription of Section 413 is very clear that the term should be 5 years and argued that there cannot be a waiver against the statute.

"How can you say there is a legitimate expectation when the person accepted the appointment with 3 years?", Justice Dhulia asked. 

Solicitor General of India Tushar Mehta, referring to the affidavit filed by the Union Government, submitted that the term of 8 members was extended not based on "cherry-picking" but on the basis of verification of character antecedents and suitability. The SG submitted that the verification reports were placed before the Search cum Selection Committee headed by the Chief Justice of India. The Committee led by the CJI left the matter to the Government to take an appropriate action. The Committee, which also consisted of another Supreme Court judge Justice Surya Kant, observed that there is no express provision in the rules, which empowers the committee to consider the issue of revision of the term of office of members, NCLT, and accordingly left the matter to the Government for an appropriate decision, the SG submitted.

 "The government considered the cases of all the persons and only considered to extend the cases of 8. If they were aggrieved, they ought to have challenged. If they are before us, we would have put them a question", Justice Ravikumar observed.

During the hearing, a serving judicial member of NCLT appeared through video conferencing and sought permission to make submissions. However, the bench said that it cannot hear him unless he files an intervention application.

When the member sought permission to file an intervention application, Justice Ravikumar said, "Do you need permission to file intervention application? Do we need to tell this to a judicial member?".

Case Title: National Company Law Tribunal Bar Association Vs Union Of India

Case No. W.P.(C) No. 180/2022

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