The doctrine of the basic structure of the Constitution was evolved in apex courts landmark judgment Kesavananda Bharati vs State of Kerala. It held that Parliament did not have the power to amend the basic structure of the Constitution. So, the question is, does transfer of judicial functions to tribunals alter the basic structure of the Constitution and, consequently, are tribunals unconstitutional
This question came up again before the Supreme Court while deciding the constitutional validity of the National Tax Tribunal (NTT) under the National Tax Tribunal Act 2005.
This Act had proposed to replace the jurisdictional high courts by the NTT in matters of hearing appeal from orders of various tax appellate tribunals which so far were appealed in the high courts. The petitionerMadras Bar Associationcontended that separation of powers, rule of law and judicial review constitute, amongst others, the basic structure of the Constitution and, therefore, any transfer of powers from the courts to the NTT should be declared as
While passing its judgment in this case, the apex court relied on the same principles laid in its earlier judgments regarding constitutional validity of the debt recovery tribunal, administrative tribunal, consumer courts and the NCLT.
It was held that though judicial review cannot be altogether abrogated by Parliament by amending the Constitution, Parliament can certainly, without in any way violating the basic structure doctrine, set up effective alternative institutional mechanisms or arrangements for judicial review. While the basic and essential feature of judicial review cannot be dispensed with, Parliament would be competent to amend the Constitution to substitute high courts with another alternative institutional mechanism or arrangement, provided it is no less efficacious than the high court. Thus, it has to be kept in view that a tribunal should be a real substitute of the high courtnot only in form and de jure but in content and de facto.
The court held that the basic structure of the Constitution will be violated if while enacting legislation to transfer judicial power, Parliament does not ensure that court/tribunal so created conforms with the salient characteristics and standards of the court sought to be substituted.
The court found that sections 5, 6, 7, 8 and 13 of the NTT Act did not conform to characteristics and standards of a high court, so it declared these sections as unconstitutional and, as a consequence, the entire NTT Act was declared unconstitutional.
This judgment brings up an interesting issuewhat is the fate of the NCLT and the national company law appellate tribunal (NCLAT) proposed to be constituted under the Companies Act, 2013
Interestingly, the provisions of the Companies Act and the NTT Act are quite similar in this respect. Sections 409, 411, 412, 413, 419, 423 and 432 of the Companies Act have similar provisions as provided in Sections 5, 6, 7, 8, 13 and 24 of the NTT Act. Relying on NTTs case, this could strengthen the petitioners case challenging these sections of the Companies Act.
The NTT and NCLT/NCLAT are distinguished in one important aspect. In the NTT case, the apex court noted that since in all matters before the NTT one of the litigating parties will be government of India (being the collector of tax), hence the court did not find appropriate that the government should decide the composition and other terms of the NTT. This is not the case in the NCLT and NCLAT; the central government may or may not be a party in a matter before the NCLT and NCLAT.
The Supreme Court in its order of May 2010 has already held that the NCLT and NCLAT are constitutional and has not struck down the sections/provisions applicable to the NCLT and NCLAT but only suggested modifications in the composition of the NCLT and NCLAT. The Supreme Court did not follow this approach in the NTT case and completely struck the relevant sections. Therefore, it will be interesting to see how the Supreme Court deals with its earlier judgment on the NCLT and NCLAT when a plea is made to strike the sections of the Companies Act.
Sadly for the new company law, the fate of the NCLT and NCLAT hangs in uncertainty.
The author is partner with J Sagar Associates. Views are personal