Rules made under S. 184 of Finance Act struck down; Centre to make new Rules for appointment to Tribunals [Full Report]

Supreme Court: The 5-judge Constitution Bench of Ranjan Goigoi, CJ and NV Ramana, Dr. DY Chandrachud, Deepak Gupta and Sanjiv Khanna, JJ has upheld the validity of Section 184 of the Finance Act, 2017 and held that the said Section does not suffer from excessive delegation of legislative functions as there are adequate principles to guide framing of delegated legislation, which would include the binding dictums of this Court.

The Court, however, struck down the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, made under Section 184 of the Finance Act, 2017, for being contrary to the parent enactment and the principles envisaged in the Constitution.

In the 255-pages long verdict, CJI Ranjan Gogoi penned the majority opinion for the Bench and Justices DY Chandrachud and Deepak Gupta wrote separate but concurrent opinions.

Majority Opinion written by Gogoi, CJ

Finance Act being a Money Bill

The Court said that the provisions of Article 110(1) have to be given an appropriate meaning and interpretation to avoid and prevent over-inclusiveness or under-inclusiveness. Any interpretation would have far reaching consequences. It is therefore, necessary that there should be absolute clarity with regard to the provisions and any ambiguity and debate should be ironed out and affirmatively decided. In case of doubt, certainly the opinion of the Speaker would be conclusive, but that would not be a consideration to avoid answering and deciding the scope and ambit of “Money Bill” under Article 110(1) of the Constitution.

It, hence, held,

“The issue and question of Money Bill, as defined under Article 110(1) of the Constitution, and certification accorded by the Speaker of the Lok Sabha in respect of Part-XIV of the Finance Act, 2017 is referred to a larger Bench.”

Correctness of Aadhaar Verdict & reference to 7-judge bench

Since both the parties had relied upon the judgment in K.S. Puttaswamy v. Union of India (Aadhaar-5 Judge), (2019) 1 SCC 1, the Court extensively examined the issue and noticed that the majority in K.S. Puttaswamy (Aadhaar-5) pronounced the nature of the Aadhaar Act, 2016 without first delineating the scope of Article 110(1) and principles for interpretation or the repercussions of such process. It said,

“It is clear to us that the majority dictum in K.S. Puttaswamy (Aadhaar-5) did not substantially discuss the effect of the word ‘only’ in Article 110(1) and offers little guidance on the repercussions of a finding when some of the provisions of an enactment passed as a “Money Bill” do not conform to Article 110(1)(a) to (g).”

Noticing that the majority judgment in K.S. Puttaswamy (Aadhaar-5) did not elucidate and explain the scope and ambit of sub-clauses (a) to (f) to clause (1) of Article 110 of the Constitution, a legal position and facet which arises for consideration in the present case and assumes considerable importance, the Court, held

“Given the various challenges made to the scope of judicial review and interpretative principles (or lack thereof) as adumbrated by the majority in K.S. Puttaswamy (Aadhaar-5) and the substantial precedential impact of its analysis of the Aadhaar Act, 2016, it becomes essential to determine its correctness. Being a Bench of equal strength as that in K.S. Puttaswamy (Aadhaar-5), we accordingly direct that this batch of matters be placed before Hon’ble the Chief Justice of India, on the administrative side, for consideration by a larger Bench.”

Validity of Section 184 of Finance Act, 2017

Accepting the submission of Attorney General KK Venugopal that Section 184 was inserted to bring uniformity and with a view to harmonise the diverse and wide-ranging qualifications and methods of appointment across different tribunals carries weight, the Court said,

“we do not think that the power to prescribe qualifications, selection procedure and service conditions of members and other office holders of the tribunals is intended to vest solely with the Legislature for all times and purposes.”

Grounds for striking down the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017

  • Search-cum-Selection Committee as formulated under the Rules is an attempt to keep the judiciary away from the process of selection and appointment of Members, Vice-Chairman and Chairman of Tribunals.
  • There has been a blatant dilution of judicial character in appointments whereby candidates without any judicial experience are prescribed to be eligible for adjudicatory posts such as that of the Presiding Officer. Parliament cannot divest judicial functions upon technical members, devoid of the either adjudicatory experience or legal knowledge.
  • In many Tribunals like the National Green Tribunal where earlier removal of members or presiding officer could only be after an enquiry by Supreme Court Judges and with necessary consultation with the Chief Justice of India, under the present Rules it is permissible for the Central Government to appoint an enquiry committee for removal of any presiding officer or member on its own. The Rules are not explicit on who would be part of such a Committee and what would be the role of the Judiciary in the process. In doing so, it significantly weakens the independence of the Tribunal members.
  • The extremely short tenure of the Members of Tribunals is anti-merit and has the effect of discouraging meritorious candidates to accept posts of Judicial Members in Tribunals.
  • There are also certain contradiction in the Rules that warranted a relook.

The Court, hence, directed the Central Government to re-formulate the Rules ensuring non-discriminatory and uniform conditions of service, including assured tenure, keeping in mind the fact that the Chairperson and Members appointed after retirement and those who are appointed from the Bar or from other specialised professions/services, constitute two separate and distinct homogeneous classes.

The Court, however, granted interim relief and directed that appointments to the Tribunal/Appellate Tribunal and the terms and conditions of appointment shall be in terms of the respective statutes before the enactment of the Finance Bill, 2017 till the new Rules are framed.

Judicial Impact Assessment

The Court issues a writ of mandamus to the Ministry of Law and Justice to carry out a Judcial Impact Assessment of all the Tribunals referable to the Finance Act, 2017 so as to analyse the ramifications of the changes in the framework of Tribunals as provided under the Finance Act, 2017.

Direct Appeal to Supreme Court

The Court also asked the Central Government to re-visit the provisions of the statutes referable to the Finance Act, 2017 or other Acts and place appropriate proposals before the Parliament for consideration of the need to remove direct appeals to the Supreme Court from orders of Tribunals within 6 months.

Chandrachud, J’s separate but concurrent opinion

Chandrachud J, who was the lone dissenting judge in the 4:1 K.S. Puttaswamy (Aadhaar-5)  verdict, has held that Part XIV of the Finance Act 2017 could not have been enacted in the form of a Money Bill, hence, the aspect of money bill should be referred to a larger Bench.

He also suggested that a “National Tribunals Commission” be set up to oversee the selection process of members, criteria for appointment, salaries and allowances, introduction of common eligibility criteria, for removal of Chairpersons and Members as also for meeting the requirement of infrastructural and financial resources. It should comprise of:

  • Three serving judges of the Supreme Court of India nominated by the Chief Justice of India;
  • Two serving Chief Justices or judges of the High Court nominated by the Chief Justice of India;
  • Two members to be nominated by the Central Government from amongst officers holding at least the rank to a Secretary to the Union Government: one of them shall be the Secretary to the Department of Justice who will be the exofficio convener; and
  • Two independent expert members to be nominated by the Union government in consultation with the Chief Justice of India
  • The senior-most among the Judges nominated by the Chief Justice of India shall be designated as the Chairperson of the NTC.

Gupta J’s separate but concurrent opinion

While Gupta, J agreed that it was necessary to have such a Commission which is itself an independent body manned by honest and competent persons, he disagreed on the composition of the said Committee as suggested by Chandrachud, J. He said that the serving Judges of the Supreme Court or the Chief Justice of the High Courts were already overburdened and that it would be much better if they could spend their time and energy in filling up the vacancies in the High Courts rather than venturing into the field of tribunals.

He also said that having a very large committee would not serve the purpose. The Composition of the “National Tribunals Committee” as suggested by Gupta, J is:

  • Two retired Supreme Court Judges with the senior most being the Chairman
  • One retired Chief Justice of High Court to be appointed by the Chief Justice of India.
  • One member representing the executive to be nominated by the Central Government from amongst officers holding the rank of Secretary to the Government of India or equivalent. This member shall be the ex-officio convener.
  • One expert member can be co-opted by the by full time members. This expert member must have expertise and experience in the field/jurisdiction covered by the tribunal to which appointments are to be made.

[Roger Mathew v. South India Bank Ltd., 2019 SCC OnLine SC 1456, decided on 13.11.2019]

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