Madras Bar Association vs. Union of India
AIR 2015 SC 1571
Case Summary
Constitutionality of Tribunals and Their functions
FACTS
The Madras Bar Association in the case of Madras Bar Association vs. Union of India filed a writ petition challenging the constitutional validity of the creation of the NCLT and NCLAT, along with specific provisions incorporated into the Companies Act, 1956, by the Companies (Second Amendment) Act, 2002. The petitioner contended that these provisions violated the basic structure of the Constitution by undermining the independence of the judiciary and the principle of separation of powers. The case was initially heard by the Madras High Court, which upheld the constitutionality of establishing the NCLT and NCLAT but identified certain defects in the provisions concerning the appointment and qualifications of their members. Both the Union of India and the Madras Bar Association appealed this decision, leading to a judgment by the Supreme Court in 2010. Subsequently, the Companies Act, 2013, was enacted, repealing the 1956 Act and introducing new provisions regarding the NCLT and NCLAT. The petitioner challenged these provisions as well, leading to the 2015 judgment.
ISSUES RAISED
Whether the establishment of the NCLT and NCLAT under the Companies Act, 2013, is constitutionally valid.
Whether the qualifications prescribed for the appointment of technical members to the NCLT and NCLAT are in line with constitutional principles and previous judgments.
Whether the composition of the Selection Committee for appointing members to the NCLT and NCLAT ensures the independence of the judiciary.
RELEVANT ARTICLES
Article 50: Mandates the separation of the judiciary from the executive in the public services of the state.
Article 323B: Empowers the Parliament to provide for the adjudication of disputes by tribunals concerning matters like taxation, foreign exchange, and industrial and labor disputes.
JUDGEMENT
The Supreme Court upheld the constitutionality of establishing the NCLT and NCLAT, reiterating that transferring certain judicial functions to specialized tribunals does not violate the basic structure of the Constitution. However, the Court found that the qualifications prescribed for technical members in Section 409(3) of the Companies Act, 2013, were similar to those previously declared invalid, as they included persons holding the rank of Joint Secretary to the Government of India, which was deemed insufficient to maintain judicial independence and competence. Consequently, these provisions were struck down. Additionally, the Court held that the composition of the Selection Committee under Section 412 of the Act did not align with the principles laid down in earlier judgments, as it included a majority of government representatives, potentially compromising the independence of the tribunals. The Court directed the government to amend these provisions to ensure that the tribunals functioned independently and effectively, free from executive interference.
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