Section 12 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 (Ordinance) held invalidated by Supreme Court

Madras Bar Association V Union of India and Ors.

Writ Petition (Civil) No.502 OF 2021, Decided on July 14, 2021

BENCH- L. Nageswara Rao, Hemant Gupta and S. Ravindra Bhat. JJJ

The majority was formed by L. Nageswara Rao, J. who delivered the leading opinion, and S. Ravindra Bhat, J. penning a separate concurring opinion. Whereas, Hemant Gupta, J. wrote a substantially dissenting opinion.

FACTS– The Madras Bar Association filed the current writ petition seeking a declaration that Section 12 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 (Ordinance) and Section 184 of the Finance Act, 2017 as amended by the Ordinance are ultra vires Articles 14, 21 and 50 of the Constitution of India inasmuch as these are violative of the principles of separation of powers and independence of judiciary, apart from being contrary to the principles laid down by several earlier judgments of the Supreme Court.

The grievance of the Petitioners in this Writ Petition mainly relates to the violation of the first proviso and the second proviso, read with the third proviso, to Section 184 (1), Sections 184(7) and 184(11) of the Finance Act, 2017. Section 184(1) of the Finance Act, 2017 and the same is tested on the touchstone of Constitution.

The Supreme Court held that Section 12 of the Ordinance making amendments in the earlier Section 184 of the Finance Act, 2017 stands invalidated.

The Discussion of the Impugned Proviso is as follows

(I) First proviso to Section 184(1) according to which a person below the age of 50 years shall not be eligible for appointment as Chairperson or Member.

Held- Underlining the importance of recruitment of Members from the bar at a young age to ensure a longer tenure, the Court was of the view that fixing a minimum age for recruitment of Members as 50 years would act as a deterrent for competent advocates to seek appointment. Practically, it would be difficult for an advocate appointed after attaining the age of 50 years to resume legal practice after completion of one term, in case he is not reappointed. Security of tenure and conditions of service are recognized as core components of independence of the judiciary. Independence of the judiciary can be sustained only when the incumbents are assured of fair and reasonable conditions of service, which include adequate remuneration and security of tenure. The Court found that first proviso to Section 184(1) is in violation of the doctrine of separation of powers as the judgment Madras Bar Assn. case has been frustrated by an impermissible legislative override.

 (II) The second proviso to Section 184(1) deals with the allowances and benefits     payable to the Members which are to be the same as are admissible to a Central Government officer holding a post carrying the same pay.

Held– The Court considered Rule 15 of the 2020 Rules according to which, Chairpersons and Members of tribunals were entitled to House Rent Allowance at the same rate as admissible to officers with the Government of India holding Group ‘A’ post carrying the same pay. In that case, it was noted that an amount of Rs 75,000 per month which was paid as HRA was not sufficient to get a decent accommodation in Delhi for Chairpersons and Members of tribunals. Taking note of the serious problem of housing and the inadequate amount that was being paid as HRA to the Members, the Court in that case directed enhancement of HRA to Rs. 1,25,000 per month to the Members and Rs 1,50,000 per month to Chairperson or Vice-Chairperson or President of tribunals. This direction was made effective from 1-1-2021.

(III) Section 184(7) which stipulates that the Selection Committee shall recommend a panel of two names for appointment to the post of Chairperson or Member and the Central Government shall take a decision preferably within three months from the date of the recommendation of the Committee, notwithstanding any judgment, order or decree of any Court.

Held- The Court recorded that sufficient reasons were given in Madras Bar Assn. case to hold that executive influence should be avoided in matters of appointments to tribunals ─ therefore, the direction that only one person shall be recommended to each post. The decision of the Court in that regard is law laid down under Article 141 of the Constitution. The only way the legislature could nullify the said decision was by curing the defect in Rule 4(2). There is no such attempt made except to repeat the provision of Rule 4(2) of the 2020 Rules in the Ordinance amending the Finance Act, 2017.

Section 184(7) was declared to be unsustainable in law as it is an attempt to override the law laid down by the Supreme Court.

(IV) The second part of Section 184(7) provides that the Government shall take a decision regarding the recommendations made by the Selection Committee preferably within a period of three months.

Held– The Court noted that such direction was necessitated in view of the inertia shown by the Union of India in making appointments and filling up the posts of Chairpersons and Members of tribunals which have been long vacant. The direction given in Madras Bar Assn. case for expediting the process of appointment was in the larger interest of administration of justice and to uphold the rule of law. The Court held, Section 184(7) as amended by the Ordinance permitting the Government to take a decision preferably within three months from the date of recommendation of the Selection Committee is invalid and unconstitutional, as this amended provision simply seeks to negate the directions of the Supreme Court.

(V) Section 184(11) fixes the tenure of the Chairperson and Member of a tribunal at four years notwithstanding anything contained in any judgment, order or decree of any court. Sub-section (11) of Section 184 has been given retrospective effect from 26-5-2017.

Held– After perusing the law laid down by earlier judgments that a short stint is anti-merit, the Court in the Madras Bar Assn. case directed the modification of tenure in Rules 9(1) and 9(2) as five years in respect of Chairpersons and Members of tribunals. The Court, in the instant petition, held that insertion of Section 184(11) prescribing a term of four years for the Chairpersons and Members of tribunals by giving retrospective effect to the provision from 26-5-2017 is clearly an attempt to override the declaration of law by the Supreme Court under Article 141 in the Madras Bar Assn. case.

Therefore, clauses (i) and (ii) of Section 184(11) were declared as void and unconstitutional.

(VI) The proviso to section 184(11) lays down that the term of office of Chairperson and Members of tribunals who were appointed between 26-5-2017 and 4-4-2021 shall be five years even though the order of appointment issued by the Government had a higher term of office or age of retirement.

Held– The Court referred to the interim directions given by the Supreme Court on 9-2-2018 in Kudrat Sandhu v. Union of India, 2018, wherein it was held that all selections to the post of Chairperson/ Chairman, Judicial/ Administrative Members shall be for a period as provided in the Act and the Rules in respect of all tribunals. Reference was also made to certain subsequent orders passed in the same case of Kudrat Sandhu.

After reference, considering the instant petition the court was of the opinion that though, there is nothing wrong with the proviso to Section 184(11) being given retrospective effect, the appointments made pursuant to the interim directions passed by the Supreme Court cannot be interfered with. The Court pointed out that even the interim orders passed by the Supreme Court cannot be overruled by a legislative act.

While making it clear that the appointments that are made to the CESTAT on the basis of interim orders passed by the Supreme Court shall be governed by the relevant statute and the rules framed thereunder, as they existed prior to the Finance Act, 2017, the Court upheld the retrospective effect given to the proviso to Section 184(11). Clarifying further, the Court stated that appointments after 4-4-2021 shall be governed by the Ordinance, as modified by the directions in the instant judgment.

Consequently, Section 12 of the Ordinance making amendments in the earlier Section 184 of the Finance Act, 2017, also stands invalidated.

The writ petition stood disposed of in terms of the majority judgment.

Cases referred: Union of India v. Madras Bar Assn., (2010) 11 SCC 1; Madras Bar Assn. v. Union of India, (2014) 10 SCC 1; Rojer Mathew v. South Indian Bank Ltd., (2020) 6 SCC 1.

OBSERVATION MADE BY THE COURT

1.      Separation of Power

The Constitution has made demarcation, without drawing formal lines between the three organs: legislature, executive and judiciary, which is nothing but a consequence of principles of equality enshrined in Article 14 of the Constitution. Accordingly, breach of separation of judicial power may amount to negation of equality under Article 14. Stating thus, the Court reaffirmed:

“Violation of separation of powers would result in infringement of Article 14 of the Constitution. A legislation can be declared as unconstitutional if it is in violation of the principle of separation of powers.”

2.      Independence of Judiciary

After discussing Article 50 (which provides that the State shall take steps to separate the judiciary from the executive in the public services of the State) and Article 37 (which declares that the principles laid down in Part IV of the Constitution are fundamental in the governance of the country and it should be the duty of the State to apply the principles in making laws), the Court observed:

“Independence is the lifeblood of the judiciary. It is the freedom from interference and pressures which provides the judicial atmosphere where a Judge can work with absolute commitment to the cause of justice and constitutional values. It is also the discipline in life, habits and outlook that enables a Judge to be impartial. Its existence depends however not only on philosophical, ethical or moral aspects but also upon several mundane things: security in tenure, freedom from ordinary monetary worries, freedom from influences and pressures within (from others in the judiciary) and without (from the executive).”

3.      Judicial Decisions and legislative Overruling

–          Judicial Review- Flagrant violation of the constitutional provisions, the law made by Parliament or a State legislature is not declared bad and legislative enactment can be struck down only on two grounds: (I) that the appropriate legislature does not have the competence to make the law, and (II) that it takes away or abridges any of the fundamental rights enumerated in Part III of the Constitution or any other constitutional provisions. ‘Manifest arbitrariness’ is also recognized as a ground under Article 14 on the basis of which a legislative enactment can be judicially reviewed.

–          Permissible Legislative Overruling- The Court extracted the following principles in consonance with which legislative overruling could be permissible:

(A) The effect of the judgments of the Court can be nullified by a legislative act removing the basis of the judgment. Such law can be retrospective. Retrospective amendment should be reasonable and not arbitrary and must not be violative of the fundamental rights guaranteed under the Constitution.

(B)  The test for determining the validity of validating legislation is that the judgment pointing out the defect would not have been passed, if the altered position as sought to be brought in by the validating statute existed before the Court at the time of rendering its judgment. In other words, the defect pointed out should have been cured such that the basis of the judgment pointing out the defect is removed.

(C) Nullification of mandamus by an enactment would be an impermissible legislative exercise. Even interim directions cannot be reversed by a legislative veto.

(D) Transgression of constitutional limitations and intrusion into the judicial power by the legislature is violative of the principle of separation of powers, the rule of law and of Article 14 of the Constitution of India.