Separation of Powers / Checks and Balances, doctrine of

This doctrine may be invoked in cases where the Legislature sought to enact laws on the issues which are primarily the province of the judiciary; or to say, the Executive Govts, exercising their powers which is primarily the province of the Legislature or the judiciary; or to say, the judiciary is exercising the powers, which is the province of the Executives or of Legislatures.

The Apex Court comprising 2 Judges, in the case of P.Kannadasan Versus State Of Tamil Nadu [AIR 1996 SC 2560], inter alia, observed to say that –

Para 15: ….. It must be remembered that our Constitution recognizes and incorporates the doctrine of separation of powers between the three organs of the State, viz., Legislature, Executive and the Judiciary. Even though the Constitution has adopted the Parliamentary form of government where the dividing line between the Legislature and the Executive becomes thin, the theory of separation of powers is still valid. Ours is also a federal form of government.

This aspect has been repeatedly emphasized by this Court in numerous decisions commencing from Shri Prithvi Cotton Mills. Under our Constitution, neither wing is superior to the other. Each wing derives its power and jurisdiction from the Constitution. Each must operate within the sphere allotted to it. Trying to make one wing superior to other would be to introduce an imbalance in the system and a negation of the basic concept of separation of powers inherent in our system of government.

Para 87: It is a fundamental principle of our constitutional scheme, and I have pointed this out in the preceding paragraph, that every organ of the State, every authority under the Constitution, derives its power from the Constitution and has to act within the limits of such power. But then the question arises as to which authority must decide what are the limits on the power conferred upon each organ or instrumentality of the State and whether such limits are transgressed or exceeded.

Now there are three main departments of the State amongst which the powers of government are divided ; the executive, the legislature and the judiciary. Under our Constitution we have no rigid separation of powers as in the United States of America, but there is a broad demarcation, though, having regard to the complex nature of governmental functions, certain degree of overlapping is inevitable. The reason for this broad separation of powers is that "the concentration of powers in any one organ may to quote the words of Chandrachud, J. (as he then was) in Indira Gandhi case "by upsetting that fine balance between the three organs, destroy the fundamental premises of a democratic government to which we are pledged".

The Constitution Bench of the Apex Court comprising 13 Judges, in the case of His Holiness Kesavananda Bharati Sripada Galvaru Versus State Of Kerala, wherein this Hon’ble Court devised the concept of “Basic structure or Basic feature” of the Constitution, (1973 (4) SCC 225 : AIR 1973 SC 1461), inter alia, observed to say that –

Para 594: …..There is ample evidence in the Constitution itself to indicate that it creates a system of checks and balances by reason of which powers are so distributed that none of the three organs it sets up can become so pre-dominant as to disable the others from exercising and discharging powers and functions entrusted to them. Though the Constitution does not lay down the principle of separation of powers in all its rigidity as is the case in the United States Constitution but it envisages such a separation to a degree as was found in Ranasinghe's case (supra).

Para 722: Our Constitution has created checks and balances to minimize the possibility of power being misused. We have no doubt that the theory propounded by the Advocate-General of Maharashtra will be repudiated by our Legislatures and the cabinets as something wholly foreign to our Constitution.

Para 1154: …. But the recognition of the truism that power corrupts and absolute power corrupts absolutely has been the wisdom that made practical men of experience in not only drawing up a written Constitution limiting powers of the legislative organs but in securing to all citizens certain basic rights against the State. …..It is against abuse of power that a constitutional structure of power relationship with checks and balances is devised and safeguards provided for, whether expressly or by necessary implication.

The Constitution Bench of the Apex Court comprising 9 Judges, in the case of I. R. Coelho (dead) By Lrs. Versus State of Tamil Nadu &Ors., inter alia, observed to say that –

Para 48:  Under the controlled Constitution, the principles of checks and balances have an important role to play. Even in England where Parliament is sovereign, Lord Steyn has observed that in certain circumstances, Courts may be forced to modify the principle of parliamentary sovereignty, for example, in cases where judicial review is sought to be abolished. By this the judiciary is protecting a limited form of constitutionalism, ensuring that their institutional role in the Government is maintained.

Para 66: In Smt. Indira Nehru Gandhi V/s. Shri RaiNarain&Anr., 1975 (Supp.) SCC 1, Chandrachud, 3., as His Lordship then was, cited with approval the opinion of Harold Laski that the "separation of powers does not mean the equal balance of powers" and observed that "what cannot be sustained is the exercise by the legislature of what is purely and indubitably a judicial function. In our cooperative federalism there is no rigid distribution of powers; what is provided is a system of salutary checks and balances."

Para 130:   Equality, rule of law, judicial review and separation of powers form parts of the basic structure of the Constitution. Each of these concepts are intimately connected. There can be no rule of law, if there is no equality before the law. These would be meaningless if the violation was not subject to the judicial review. All these would be redundant if the legislative, executive and judicial powers are vested in one organ. Therefore, the duty to decide whether the limits have been transgressed has been placed on the judiciary.

Para 145: The constitutional amendments are subject to limitations and if the question of limitation is to be decided by the Parliament itself which enacts the impugned amendments and gives that law a complete immunity, it would disturb the checks and balances in the Constitution. The authority to enact law and decide the legality of the limitations cannot vest in one organ. The validity to the limitation on the rights in Part III can only be examined by another independent organ, namely, the judiciary.

The Constitution Bench of the Apex Court comprising 5 Judges, in the case of Union Of India Versus R. Gandhi President Madras Bar Association, inter alia, observed to say that –

Para 17: In Rai Sahib Ram JawayaKapur vs. The State of Punjab - 1955 (2)SCR 225, this Court explained the doctrine of separation of powers thus :

"the Indian Constitution has not indeed recognised the doctrine of separation of powers in its absolute rigidity but the functions of the different parts or branches of the Government have been sufficiently differentiated and consequently it can very well be said that our constitution does not contemplate assumption, by one organ or part of the state, of functions that essentially belong to another."

In Indira Nehru Gandhi vs. Raj Narain - 1975 Supp SCC 1, this Court observed that the Indian Constitution recognizes separation of power in a broad sense without however their being any rigid separation of power as under the American Constitution or under the Australian Constitution. This court held thus :

…..

"the Constitution has a basic structure comprising the three organs of the republic: the Executive, the Legislature and the Judiciary. It is through each of these organs that the sovereign will of the people has to operate and manifest itself and not through only one of them. None of these three separate organs of the Republic can take over the functions assigned to the other. This is the basic structure or scheme of the system of Government of Republic. . . . . . . . . . . . "but no constitution can survive without a conscious adherence to its fine checks and balances.

In L. Chandra Kumar, the seven-Judge Bench of this Court referred to the task entrusted to the superior courts in India thus :

"the Judges of the superior courts have been entrusted with the task of upholding the Constitution and to this end, have been conferred the power to interpret it. It is they who have to ensure that the balance of power envisaged by the Constitution is maintained and that the legislature and the executive do not, in the discharge of their functions, transgress constitutional limitations. (emphasis supplied) The doctrine of separation of powers has also been always considered to be a part of the basic structure of the Constitution (See :KeshavanandaBharati vs. State of Kerala - 1973 (4) SCC 225, Indira Gandhi vs. Raj Narain -1975 Supp SCC 1, State of Bihar vs. BalMukund Shah - 2000 (4) SCC 640 and I. R. Coelho vs. State of Tamil Nadu - 2007 (2) SCC 1 ). The argument in favour of Tribunals

The Constitution Bench of the Apex Court comprising 5 Judges, in the case of Bhim Singh Versus Union Of India [2010 (5) SCC 538 : 2010 (5) Scale 37], inter alia, observed to say that –

Para 61: In KesavanandaBharati vs. State of Kerala & Another, (1973) 4 SCC 225 and later in Indira Gandhi vs. Raj Narain, AIR 1977 SC 69, this Court declared Separation of Powers to be a part of the Basic Structure of the Constitution. In KesavanandaBharati's case, (supra) Shelat& Grover, JJs. in para 577 observed the precise nature of the concept as follows:

"There is ample evidence in the Constitution itself to indicate that it creates a system of checks and balances by reason of which powers are so distributed that none of the three organs it sets up can become so pre-dominant as to disable the others from exercising and discharging powers and functions entrusted to them. Though the Constitution does not lay down the principle of separation of powers in all its rigidity as is the case in the United States Constitution but it envisages such a separation to a degree as was found in Ranasinghe'scase . The judicial review provided expressly in our Constitution by means of Articles 226 and 32 is one of the features upon which hinges the system of checks and balances."

Para 68: This court has previously held that the taking away of the judicial function through legislation would be violative of separation of powers. As Chandrachud, J. noted in Indira Nehru Gandhi case (supra), "the exercise by the legislature of what is purely and indubitably a judicial function is impossible to sustain in the context even of our co-operative federalism which contains no rigid distribution of powers but which provides a system of salutary checks and balances." [para. 689] This is because such legislation upsets the balance between the various organs of the State thus harming the system of accountability in the Constitution. Thus, the test for the violation of separation of powers must be precisely this. A law would be violative of separation of powers not if it results in some overlap of functions of different branches of the State, but if it takes over an essential function of the other branch leading to lapse in constitutional accountability. It is through this test that we must analyze the present Scheme.

Independent functioning of Courts and tribunals

[(2014) 10 SCC 1] [National Tax Tribunal Case]

Para 75: The principal contention advanced at the hands of the learned counsel for the petitioners was premised on the submission, that Article 323B, inserted by the Constitution (Forty-second Amendment) Act 1976, to the extent that it violated the principles of, "separation of powers", "rule of law", and "judicial review", was liable to be struck down. This striking down was founded on an alleged violation of the "basic structure" doctrine. Similarly, various provisions of the NTT Act, were sought to be assailed. The provisions of the NTT Act were challenged, on the premise, that they had trappings of executive control, over the adjudicatory process vested with the NTT, and therefore, were liable to be set aside as unconstitutional.

Para 100: Before venturing to examine the controversy in hand it needs to be noticed, that some of the assertions raised at the hands of the petitioners in the present controversy have since been resolved. These have been noticed in an order passed by this Court in Madras Bar Association V/s. Union of India, (2010) 11 SCC 67, which is being extracted hereunder:-

"1. In all these petitions, the constitutional validity of the National Tax Tribunal Act, 2005 ("the Act", for short) is challenged. In TC No. 150 of 2006, additionally there is a challenge to Section 46 of the Constitution (Forty-second Amendment) Act, 1976 and Article 323-B of the Constitution of India. It is contended that Section 46 of the Constitution (Forty-second Amendment) Act, is ultra vires the basic structure of the Constitution as it enables proliferation of the tribunal system and makes serious inroads into the independence of the judiciary by providing a parallel system of administration of justice, in which the executive has retained extensive control over matters such as appointment, jurisdiction, procedure, etc. It is contended that Article 323-B violates the basic structure of the Constitution as it completely takes away the jurisdiction of the High Courts and vests them in the National Tax Tribunal, including trial of offences and adjudication of pure questions of law, which have always been in the exclusive domain of the judiciary.

2. When these matters came up on 9-1-2007 before a three-Judge Bench, the challenge to various sections of the Act was noticed.

3. The first challenge was to Section 13 which permitted "any person" duly authorized to appear before the National Tax Tribunal. The Union of India submitted that the appropriate amendment will be made in the Act to ensure that only lawyers, chartered accountants and parties in person will be permitted to appear before the National Tax Tribunal.

4. The second challenge was to Section 5(5) of the Act which provided that:

"5. (5) The Central Government may in consultation with the Chairperson transfer a member from headquarters of one Bench in one State to the headquarters of another Bench in another State or to the headquarters of any other Bench within a State:"

5. The Union of India submitted that having regard to the nature of the functions to be performed by the Tribunal and the constitutional scheme of separation of powers and independence of judiciary, the expression "consultation with the Chairperson" occurring in Section 5(5) of the Act should be read and construed as "concurrence of the Chairperson".

6. The third challenge was to Section 7 which provided for a Selection Committee comprising of (a) the Chief Justice of India or a Judge of the Supreme Court nominated by him, (b) Secretary in the Ministry of Law and Justice, and (c) Secretary in the Ministry of Finance.

It was contended by the petitioners that two of the members who are Secretaries to the Government forming the majority may override the opinion of the Chief Justice or his nominee which was improper. It was stated on behalf of the Union of India that there was no question of two Secretaries overriding the opinion of the Chief Justice of India or his nominee since primacy of the Chairperson was inbuilt in the system and this aspect will be duly clarified.

7. In regard to certain other defects in the Act, pointed out by the petitioners, it was submitted that the Union Government will examine them and wherever necessary suitable amendments will be made.

8. In view of these submissions, on 9-1-2007, this Court made an order reserving liberty to the Union Government to mention the matter for listing after the appropriate amendments were made in the Act.

9. On 21-1-2009, when arguments in CA No. 3067 of 2004 and CA No. 3717 of 2005, which related to the challenge to Parts I-B and I-C of the Companies Act, 1956 were in progress before the Constitution Bench, it was submitted that these matters involved a similar issue and they could be tagged and disposed of in terms of the decision in those appeals. Therefore the Constitution Bench directed these cases to be listed with those appeals, even though there is no order of reference in these matters. CA No. 3067 of 2004 and CA No. 3717 of 2005 were subsequently heard at length and were reserved for judgment. These matters which were tagged were also reserved for judgment.

10. We have disposed of CA No. 3067 of 2004 and CA No. 3717 of 2005 today (Union of India V/s. Madras Bar Association, (2010) 11 SCC 1), by a separate order. Insofar as these cases are concerned, we find that TC (Civil) No. 150 of 2006 involves the challenge to Article 323-B of the Constitution. The said article enables appropriate legislatures to provide by law, for adjudication or trial by tribunals or any disputes, complaints, or offences with respect to all or any of the matters specified in clause (2) thereof. Sub-clause (i) of clause (2) of Article 323-B enables such tribunals to try offences against laws with respect to any of the matters specified in sub- clauses (a) to (h) of clause (2) of the said article.

11. One of the contentions urged in support of the challenge to Article 323- B relate to the fact that tribunals do not follow the normal rules of evidence contained in the Evidence Act, 1872. In criminal trials, an accused is presumed to be innocent till proved guilty beyond reasonable doubt, and the Evidence Act plays an important role, as appreciation of evidence and consequential findings of facts are crucial. The trial would require experience and expertise in criminal law, which means that the Judge or the adjudicator to be legally trained. Tribunals which follow their own summary procedure, are not bound by the strict rules of evidence and the members will not be legally trained. Therefore it may lead to convictions of persons on evidence which is not sufficient in probative value or on the basis of inadmissible evidence. It is submitted that it would thus be a retrograde step for separation of executive from the judiciary.

12. Appeals on issues on law are traditionally heard by the courts. Article 323-B enable constitution of tribunals which will be hearing appeals on pure questions of law which is the function of the courts. In L. Chandra Kumar V/s. Union of India, (1997) 3 SCC 261, this Court considered the validity of only clause (3)(d) of Article 323-B but did not consider the validity of other provisions of Article 323-B.

13. The appeals relating to constitutional validity of the National Company Law Tribunals under the Companies Act, 1956 did not involve the consideration of Article 323-B. The constitutional issues raised in TC (Civil) No. 150 of 2006 were not touched on as the power to establish Company Tribunals was not traceable to Article 323-B but to several entries of Lists I and III of the Seventh Schedule and consequently there was no challenge to this article.

14. The basis of attack in regard to Parts I-B and I-C of the Companies Act and the provisions of the NTT Act are completely different. The challenge to Parts I-B and I-C of the Companies Act, 1956 seeks to derive support from Article 323-B by contending that Article 323-B is a bar for constitution of any tribunal in respect of matters not enumerated therein. On the other hand the challenge to the NTT Act is based on the challenge to Article 323-B itself.

15. We therefore find that these petitions relating to the validity of the NTT Act and the challenge to Article 323-B raise issues which did not arise in the two civil appeals. Therefore these cases cannot be disposed of in terms of the decision in the civil appeals but require to be heard separately. We accordingly direct that these matters be delinked and listed separately for hearing."

Para 101: (i) A perusal of the judgment rendered in Kesavananda Bharati case (supra) reveals, that "separation of powers" creates a system of checks and balances, by reasons of which, powers are so distributed, that none of the three organs transgresses into the domain of the other. The concept ensures the dignity of the individual. The power of "judicial review" ensures, that executive functioning confines itself within the framework of law enacted by the legislature. Accordingly, the demarcation of powers between the legislature, the executive and the judiciary, is regarded as the basic element of the constitutional scheme.

When the judicial process is prevented by law, from determining whether the action taken, was or was not, within the framework of the legislation enacted, it would amount to the transgression of the adjudicatory/determinatory process by the legislature. Therefore, the exclusion of the power of "judicial review", would strike at the "basic structure" of the Constitution.

(ii) In Indira Nehru Gandhi case (supra), this Court arrived at the conclusion, that clause (4) of Article 329A of the Constitution, destroyed not only the power of "judicial review", but also the rule of "separation of powers".

By the above legislative provision, an election declared void, on the culmination of an adjudicatory process, was treated as valid. Meaning thereby, that the judicial process was substituted by a legislative pronouncement.

It was held, that the issue to be focused on was, whether the amendment which was sought to be assailed, violated a principle which constituted the "basic structure" of the Constitution. The argument raised in opposition was, that a determination which had a bearing on just one (or a few) individual(s) would not raise such an issue. The query was answered by concluding, that it would make no difference whether it related to one case, or a large number of cases. Encroachment on the "basic structure" of the Constitution would be invalid, irrespective of whether, it related to a limited number of individuals or a large number of people.

The view expressed was, that if lawmakers were to be assigned the responsibility of administering those laws, and dispensing justice, then those governed by such laws would be left without a remedy in case they were subjected to injustice. For the above reason, clause (4) of Article 329A was declared invalid. This Court by majority held, that clauses (4) and (5) of Article 329A were unconstitutional and void.

(iii) In Minerva Mills Ltd. case (supra), first and foremost, this Court confirmed the view expressed in Kesavananda Bharati case (supra) and Indira Nehru Gandhi case (supra), that the amending power of the Parliament, was not absolute. The Parliament, it was maintained, did not have the power to amend the "basic structure" of the Constitution. A legislative assertion, that the enacted law had been made, for giving effect to a policy to secure the provisions made in Part IV of the Constitution, had the effect of excluding the adjudicatory process. In the case on hand, this Court arrived at the conclusion, that Section 4 of the Constitution (Forty-second Amendment) Act was beyond the amending power of the Parliament, and the same was void, because it had the effect of damaging the basic and essential features of the Constitution and destroying its "basic structure", by totally excluding any challenge to any law, even on the ground, whether it was inconsistent with or it had abridged, any of the rights conferred by Articles 14 and 19 of the Constitution. Furthermore, Section 55 of the Constitution (Forty-second Amendment), Act was held to be beyond the amending power of the Parliament. It was held to be void, as it had the effect of removing all limitations on the powers of Parliament, to amend the Constitution including, the power to alter its basic and essential features, i.e., its "basic structure". According to this Court, the reason for a broad "separation of powers" under the Constitution was, because concentration of powers in any one of the organs of the Government, would destroy the foundational premise of a democratic Government. The illustrations narrated in the judgment are of some relevance. We shall therefore, narrate them hereunder, in our own words:

(a) Take for example a case where the executive, which is in-charge of administration, acts to the prejudice of a citizen. And a question arises, as to what are the powers of the executive, and whether the executive had acted within the scope of its powers. Such a question obviously, cannot be left to the executive to decide, for two very good reasons. Firstly, because the decision would depend upon the interpretation of the Constitution or the laws, which are, pre-eminently fit to be decided by the judiciary, as it is the judiciary alone which would be possessed of the expertise in decision making. And secondly, because the legal protection afforded to citizens by the Constitution or the laws would become illusory, if it were left to the executive to determine the legality, of its own actions.

(b) Take for example, a case where the legislature makes a law, which is to the prejudice of a citizen. And a dispute arises, whether in making the law the legislature had acted outside the area of its legislative competence, or whether the law was violative of the fundamental rights of the citizen, or of some other provision(s) of law.

Its resolution cannot be left to the legislature to decide, for two very good reasons. Firstly, because the decision would depend upon the interpretation of the Constitution or the laws, which are, pre-eminently fit to be decided by the judiciary, as it is the judiciary alone which would be possessed of the expertise in decision making. And secondly, because the legal protection afforded to citizens, by the Constitution or the laws would become illusory, if it were left to the legislature to determine the legality of its own actions.

On the basis of the examples cited above, this Court concluded, that the creation of an independent machinery, for resolving disputes, was constitutionally vested with the judiciary. The judiciary was vested with the power of "judicial review", to determine the legality of executive action, and the validity of laws enacted by legislature.

It was further held, that it was the solemn duty of the judiciary under the Constitution, to keep the different organs of the State, such as the executive and the legislature, within the limits of the powers conferred upon them by the Constitution. It was accordingly also held, that the power of "judicial review" was an integral part of India s constitutional system, and without it, the "rule of law" would become a teasing illusion, and a promise of unreality. Premised on the aforesaid inferences, this Court finally concluded, that if there was one feature of the Indian Constitution, which more than any others, was its "basic structure" fundamental to the maintenance of democracy and the "rule of law", it was the power of "judicial review". While recording the aforementioned conclusion, this Court also recorded a clarificatory note, namely, that it should not be taken, that an effective alternative institutional mechanism or arrangement for "judicial review" could not be made by Parliament. It was, however, clearly emphasized, that "judicial review" was a vital principle of the Indian Constitution, and it could not be abrogated, without affecting the "basic structure" of the Constitution. It is therefore, that it came to be held, that a constitutional amendment, which had the effect of taking away the power of "judicial review", by providing, that it would not be liable to be questioned, on any ground, was held to be beyond the amending power of the Parliament. For, that would make the Parliament the sole judge, of the constitutional validity, of what it had done, and thereby, allow it to determine the legality of its own actions. In the above judgment, the critical reflection, in our considered view was expressed by the words, "Human ingenuity, limitless though it may be, has yet not devised a system, by which the liberty of the people can be protected, except for the intervention of the courts of law".

(iv) In S.P. Gupta case (supra), the concept of "independence of judiciary" came up for consideration before this Court. This Court having examined the issue, arrived at certain conclusions with reference to High Court and Supreme Court Judges. It was held, that their appointment and removal, as also their transfer, deserved to be preserved, within the framework of the judicial fraternity. Likewise, the foundation of appointment of outside Chief Justices, was made with a similar objective. Based on the same, parameters were also laid down, in respect of appointment of Judges to the Supreme Court. The consideration even extended to the appointment of the Chief Justice of the Supreme Court. All this, for ensuring judicial autonomy. It was felt that independence of the judiciary, could be preserved only if primacy in the above causes rested with the judiciary itself, with a minimal involvement of the executive and the legislature. It needs to be highlighted, that independence of judges of the High Courts and the Supreme Court was considered as salient, to ensure due exercise of the power of "judicial review". It would be pertinent to mention, that the judgment rendered by this Court in S.P. Gupta case (supra) came to be doubted in Subhash Sharma V/s. Union of India, (1991) Suppl. 1 SCC 574. Thereupon, the matter was reconsidered by a constitution bench of nine Judges in, Supreme Court Advocates on Record Association V/s. Union of India, (1993) 4 SCC 441. On the subject of preserving independence in respect of appointment of judges of the High Courts, as also their transfer, the position recorded earlier in S.P.Gupta case (supra) remained substantially unaltered. So also, of appointments of Chief Justices of High Courts and the Supreme Court. It was reiterated, that to ensure judicial independence, primacy in all these matters should be with the judiciary.

(v) Having recorded the determination rendered by this Court to the effect that "separation of powers", "rule of law" and "judicial review" at the hands of an independent judiciary, constitute the "basic structure" of the Constitution, we are in a position now to determine, how the aforesaid concepts came to be adopted by this Court, while adjudicating upon the validity of provisions similar to the ones, which are subject of consideration, in the case on hand. The first controversy arose with reference to the Administrative Tribunals Act, 1985, which was enacted under Article 323A of the Constitution. In S.P. Sampath Kumar case (supra), it was sought to be concluded, that the power of "judicial review" had been negated by the aforementioned enactment, inasmuch as, the avenue of redress under Articles 226 and 227 of the Constitution before the High Court, was no longer available. It was also sought to be asserted, that the tribunal constituted under the enactment, being a substitute of the High Court, ought to have been constituted in a manner, that it would be able to function in the same manner as the High Court itself. Since insulation of the judiciary from all forms of interference, even from the coordinate branches of the Government, was by now being perceived as a basic essential feature of the Constitution, it was felt that the same independence from possibility of executive pressure or influence, needed to be ensured for the Chairman, Vice Chairman and Members of the administrative tribunal. In recording its conclusions, even though it was maintained, that "judicial review" was an integral part of the "basic structure" of the Constitution, yet it was held, that Parliament was competent to amend the Constitution, and substitute in place of the High Court, another alternative institutional mechanism or arrangement. This Court, however cautioned, that it was imperative to ensure, that the alternative arrangement, was no less independent, and no less judicious, than the High Court (which was sought to be replaced) itself. This was conveyed by observing, "if any constitutional amendment made by the Parliament takes away from the High Court the power of "judicial review" in any particular area, and vests it in any other institutional mechanism or authority, it would not be violative of the basic structure doctrine so long as the essential condition is fulfilled, namely, that the alternative institutional mechanism or authority set up by the Parliament by amendment is no less effective than the High Court". The exclusion of the High Courts jurisdiction under Articles 226 and 227 of the Constitution, it was held, would render the Administrative Tribunals Act, 1985 unconstitutional, unless the amendments to the provisions of Sections 4, 6 and 8 thereof, as suggested by this Court, were carried out. Insofar as Section 4 is concerned, it was suggested that it must be amended so as not to confer absolute and unfettered discretion on the executive in matters of appointment of the Chairman, Vice Chairman and Members of the administrative tribunals. Section 6(1)(c) was considered to be invalid, and as such, needed to be deleted. It was also indicated, that appointment of Chairman, Vice Chairman and Administrative Members should be made by the executive, only in consultation with the Chief Justice of India, and that, such consultation had to be meaningful and effective, inasmuch as, ordinarily the recommendation of the Chief Justice of India ought to be accepted, unless there were cogent reasons not to. If there were any reasons, for not accepting the recommendation, they needed to be disclosed to the Chief Justice. Alternatively, it was commended, that a high powered Selection Committee headed by the Chief Justice or a sitting Judge of the Supreme Court, or of the concerned High Court (nominated by the Chief Justice of India), could be set up for such selection. If either of these two modes of appointment was adopted, it was believed, that the impugned Act would be saved from invalidation. It was mentioned, that Section 6(2) also needed to be amended, so as to make a District Judge or an Advocate, who fulfilled the qualifications for appointment as a judge of the High Court, eligible for appointment as Vice Chairman. With reference to Section 8 it was felt, that a term of five years of office, would be too short and ought to be suitably extended. It was so felt, because the presently prescribed tenure would neither be convenient to the persons selected for the job, nor expedient to the scheme of adjudication contemplated under the Administrative Tribunals Act. It was also opined, that the Government ought to set up a permanent bench wherever there was a seat of the High Court. And if that was not feasible, at least a circuit bench of the administrative tribunal, wherever there is a seat of the High Court. That would alleviate the hardship, which would have to be faced by persons, who were not residing close to the places at which the benches of the tribunal were set up. In this behalf, it may only be stated that all the suggestions made by this Court were adopted.

(vi) Post S.P. Sampath Kumar case (supra), divergent views came to be expressed in a number of judgments rendered by this Court. It is therefore, that the judgment in S.P. Sampath Kumar case (supra), came up for reconsideration in L. Chandra Kumar case (supra). On reconsideration, this Court declared, that the power of "judicial review" over legislative action was vested in the High Courts under Article 226, and in the Supreme Court under Article 32 of the Constitution. "Judicial review" was again held to be an integral and essential feature of the Constitution, constituting its "basic structure". It was further concluded, that ordinarily the power of High Courts and the Supreme Court, to test the constitutional validity of legislations, could never be ousted or excluded. It was also held, that the power vested in the High Courts of judicial superintendence over all Courts and tribunals within their respective jurisdictions, was also part of the "basic structure" of the Constitution. And that, a situation needed to be avoided where High Courts were divested from their judicial functions, besides the power of constitutional interpretation. Referring to the inappropriate and ineffective functioning of the tribunals, this Court observed, that the above malady was on account of lack of the responsibility, of fulfilling the administrative requirements of administrative tribunals. It was opined, that the malady could be remedied by creating a single umbrella organization, to ensure the independence of the members of such tribunals, and to provide funds for the fulfillment of their administrative requirements. Although the determination of the governmental organization, to discharge such a role was left open, it was recommended, that it should preferably be vested with the Law Department. With reference to the controversies which arose before the tribunals, it was held, that matters wherein interpretation of statutory provisions or rules, or where the provisions of the Constitution were expected to be construed, the same would have to be determined by a bench consisting of at least two Members, one of whom must be a Judicial Member. Having found that the provisions of the Administrative Tribunals Act, had impinged on the power of "judicial review" vested in the High Court, clause (2)(d) of Article 323A and clause (3)(d) of Article 323B, to the extent they excluded the jurisdiction of the High Courts and the Supreme Court under Articles 226/227 and 32 of the Constitution, were held to be unconstitutional. Likewise, the "exclusion of jurisdiction" clauses in all other legislations enacted under the aegis of Articles 323A and 323B, were also held to be unconstitutional. In view of the above, it was concluded, that the jurisdiction conferred upon the High Court under Articles 226/227, and upon the Supreme Court under Article 32 of the Constitution, was a part of the inviolable "basic structure" of the Constitution. Since the said jurisdiction could not be ousted, jurisdiction vested in the tribunals would be deemed to be discharging a supplemental role, in the exercise of the powers conferred by Articles 226/227 and 32 of the Constitution. Although it was affirmed, that such tribunals would be deemed to be possessed of the competence to test the constitutional validity of the statutory provisions and rules, it was provided, that all decisions of tribunals would be subject to scrutiny before a division bench of the High Court, within whose jurisdiction the concerned tribunal had passed the order. In the above view of the matter, it was held that the tribunals would act like courts of first instance, in respect of the areas of law, for which they had been constituted. After adjudication at the hands of the tribunals, it would be open for litigants to directly approach the High Courts. Section 5(6) of the Administrative Tribunals Act, interpreted in the manner indicated above, was bestowed with validity.

(vii) In Union of India V/s. Madras Bar Association case (supra), all the conclusions/propositions narrated above, were reiterated and followed, whereupon the fundamental requirements, which need to be kept in mind while transferring adjudicatory functions from courts to tribunals, were further crystalised. It came to be unequivocally recorded that tribunals vested with judicial power (hitherto before vested in, or exercised by courts), should possess the same independence, security and capacity, as the courts which the tribunals are mandated to substitute. The Members of the tribunals discharging judicial functions, could only be drawn from sources possessed of expertise in law, and competent to discharge judicial functions. Technical Members can be appointed to tribunals where technical expertise is essential for disposal of matters, and not otherwise. Therefore it was held, that where the adjudicatory process transferred to tribunals, did not involve any specialized skill, knowledge or expertise, a provision for appointment of Technical Members (in addition to, or in substitution of Judicial Members) would constitute a clear case of delusion and encroachment upon the independence of the judiciary, and the "rule of law". The stature of the members, who would constitute the tribunal, would depend on the jurisdiction which was being transferred to the tribunal. In other words, if the jurisdiction of the High Court was transferred to a tribunal, the stature of the members of the newly constituted tribunal, should be possessed of qualifications akin to the judges of the High Court. Whereas in case, the jurisdiction and the functions sought to be transferred were being exercised/performed by District Judges, the Members appointed to the tribunal should be possessed of equivalent qualifications and commensurate stature of District Judges. The conditions of service of the members should be such, that they are in a position to discharge their duties in an independent and impartial manner. The manner of their appointment and removal including their transfer, and tenure of their employment, should have adequate protection so as to be shorn of legislative and executive interference. The functioning of the tribunals, their infrastructure and responsibility of fulfilling their administrative requirements ought to be assigned to the Ministry of Law and Justice. Neither the tribunals nor their members, should be required to seek any facilities from the parent ministries or department concerned. Even though the legislature can reorganize the jurisdiction of judicial tribunals, and can prescribe the qualifications/eligibility of members thereof, the same would be subject to "judicial review" wherein it would be open to a court to hold, that the tribunalization would adversely affect the adjudicatory standards, whereupon it would be open to a court to interfere therewith. Such an exercise would naturally be, a part of the checks and balances measures, conferred by the Constitution on the judiciary, to maintain the rule of "separation of powers" to prevent any encroachment by the legislature or the executive.

Para 102: The position of law summarized in the foregoing paragraph constitutes a declaration on the concept of the "basic structure", with reference to the concepts of "separation of powers", the "rule of law", and "judicial review". Based on the conclusions summarized above, it will be possible for us to answer the first issue projected before us, namely, whether "judicial review" is a part of the "basic structure" of the Constitution. The answer has inevitably to be in the affirmative. From the above determination, the petitioners would like us to further conclude, that the power of "judicial review" stands breached with the promulgation of the NTT Act. This Court in Minerva Mills Ltd. case (supra) held, that it should not be taken, that an effective alternative institutional mechanism or arrangement for "judicial review" could not be made by Parliament. The same position was reiterated in S.P. Sampath Kumar case (supra), namely, that "judicial review" was an integral part of the "basic structure" of the Constitution. All the same it was held, that Parliament was competent to amend the Constitution, and substitute in place of the High Court, another alternative institutional mechanism (court or tribunal). It would be pertinent to mention, that in so concluding, this Court added a forewarning, that the alternative institutional mechanism set up by Parliament through an amendment, had to be no less effective than the High Court itself. In L. Chandra Kumar case (supra), even though this Court held that the power of "judicial review" over legislative action vested in High Courts, was a part of the "basic structure", it went on to conclude that "ordinarily" the power of High Courts to test the constitutional validity of legislations could never be ousted. All the same it was held, that the powers vested in High Courts to exercise judicial superintendence over decisions of all courts and tribunals within their respective jurisdictions, was also a part of the "basic structure" of the Constitution. The position that Parliament had the power to amend the Constitution, and to create a court/tribunal to discharge functions which the High Court was discharging, was reiterated, in Union of India V/s. Madras Bar Association case (supra). It was concluded, that the Parliament was competent to enact a law, transferring the jurisdiction exercised by High Courts, in regard to any specified subject, to any court/tribunal. But it was clarified, that Parliament could not transfer power vested in the High Courts, by the Constitution itself. We therefore have no hesitation in concluding, that appellate powers vested in the High Court under different statutory provisions, can definitely be transferred from the High Court to other courts/tribunals, subject to the satisfaction of norms declared by this Court. Herein the jurisdiction transferred by the NTT Act was with regard to specified subjects under tax related statutes. That, in our opinion, would be permissible in terms of the position expressed above. Has the NTT Act transferred any power vested in courts by the Constitution? The answer is in the negative. The power of "judicial review" vested in the High Court under Articles 226 and 227 of the Constitution, has remained intact. This aspect of the matter, has a substantial bearing, to the issue in hand. And will also lead to some important inferences. Therefore, it must never be overlooked, that since the power of "judicial review" exercised by the High Court under Articles 226 and 227 of the Constitution has remained unaltered, the power vested in High Courts to exercise judicial superintendence over the benches of the NTT within their respective jurisdiction, has been consciously preserved. This position was confirmed by the learned Attorney General for India, during the course of hearing. Since the above jurisdiction of the High Court has not been ousted, the NTT will be deemed to be discharging a supplemental role, rather than a substitutional role. In the above view of the matter, the submission that the NTT Act violates the "basic structure" of the Constitution, cannot be acquiesced to.

Para 103: Even though we have declined to accept the contention advanced on behalf of the petitioners, premised on the "basic structure" theory, we feel it is still essential for us, to deal with the submission advanced on behalf of the respondents in response. We may first record the contention advanced on behalf of the respondents. It was contended, that a legislation (not being an amendment to the Constitution), enacted in consonance of the provisions of the Constitution, on a subject within the realm of the concerned legislature, cannot be assailed on the ground that it violates the "basic structure" of the Constitution. For the present controversy, the respondents had placed reliance on Articles 245 and 246 of the Constitution, as also, on entries 77 to 79, 82 to 84, 95 and 97 of the Union List of the Seventh Schedule, and on entries 11A and 46 of the Concurrent List of the Seventh Schedule. Based thereon it was asserted, that Parliament was competent to enact the NTT Act. For examining the instant contention, let us presume it is so. Having accepted the above, our consideration is as follows. The Constitution regulates the manner of governance in substantially minute detail. It is the fountainhead distributing power, for such governance. The Constitution vests the power of legislation at the Centre, with the Lok Sabha and the Rajya Sabha, and in the States with the State Legislative Assemblies (and in some States, the State Legislative Councils, as well). The instant legislative power is regulated by "Part XI" of the Constitution. The submission advanced at the hands of the learned counsel for the respondents, insofar as the instant aspect of the matter is concerned, is premised on the assertion that the NTT Act has been enacted strictly in consonance with the procedure depicted in "Part XI" of the Constitution. It is also the contention of the learned counsel for the respondents, that the said power has been exercised strictly in consonance with the subject on which the Parliament is authorized to legislate. Whilst dealing with the instant submission advanced at the hands of the learned counsel for the respondents, all that needs to be stated is, that the legislative power conferred under "Part XI" of the Constitution has one overall exception, which undoubtedly is, that the "basic structure" of the Constitution, cannot be infringed, no matter what. On the instant aspect, some relevant judgments, rendered by constitutional benches of this Court, have been cited hereinabove. It seems to us, that there is a fine difference in what the petitioners contend, and what the respondents seek to project. The submission advanced at the hands of the learned counsel for the petitioners does not pertain to lack of jurisdiction or inappropriate exercise of jurisdiction. The submission advanced at the hands of the learned counsel for the petitioners pointedly is, that it is impermissible to legislate in a manner as would violate the "basic structure" of the Constitution. This Court has repeatedly held, that an amendment to the provisions of the Constitution, would not be sustainable if it violated the "basic structure" of the Constitution, even though the amendment had been carried out, by following the procedure contemplated under "Part XI" of the Constitution. This leads to the determination, that the "basic structure" is inviolable. In our view, the same would apply to all other legislations (other than amendments to the Constitution) as well, even though the legislation had been enacted by following the prescribed procedure, and was within the domain of the enacting legislature, any infringement to the "basic structure" would be unacceptable. Such submissions advanced at the hands of the learned counsel for the respondents are, therefore, liable to be disallowed. And are accordingly declined.

II. Whether the transfer of adjudicatory functions vested in the High Court to the NTT violates recognized constitutional conventions?

III. Whether while transferring jurisdiction to a newly created court/tribunal, it is essential to maintain the standards and the stature of the court replaced?

Para 104: In addition to the determination on the adjudication of the present controversy on the concept of basic structure, the instant matter calls for a determination on the sustainability of the NTT Act, from other perspectives also. We shall now advert to the alternative contentions. First and foremost, it was the submission of the learned counsel for the petitioners, that it is impermissible for legislature to abrogate/divest the core judicial appellate functions, specially, the functions traditionally vested in a superior court, to a quasi judicial authority devoid of essential ingredients of the superior court. The instant submission was premised on the foundation, that such action is constitutionally impermissible.

Para 105: In order to determine whether or not the appellate functions which have now been vested with the NTT, constituted the core judicial appellate function traditionally vested with the jurisdictional High Courts, we have recorded under the heading "The Historical Perspective", legislative details, pertaining to the Income Tax Act, the Customs Act and the Excise Act. We had to do so, for that was the only manner to deal with the instant aspect of the controversy. A perusal of the historical perspective reveals, that as against the initial assessment of tax/duty liability, the first forum for challenge has traditionally been with an executive appellate adjudicatory authority. Legislative details reveal, that for some time there was a power of reference, exercisable on "questions of law". The adjudication thereof rested with the jurisdictional High Courts. The second appellate remedy has always been before a quasi-judicial appellate authority, styled as an Appellate Tribunal. Across the board, under all the enactments which are relevant for the present controversy, proceedings before the Appellate Tribunal have been legislatively described as "judicial proceedings". It is, therefore apparent, that right from the beginning, the clear legislative understanding was, that from the stage of the proceedings before the Appellate Tribunal, the proceedings were of the nature of "judicial proceedings". Again across the board, under all the enactments, relevant for the present controversy, questions of law were originally left to be adjudicated by the jurisdictional High Courts. The reference jurisdiction, was substituted in all the enactments, and converted into appellate jurisdiction. The instant appellate jurisdiction was vested with the jurisdictional High Court. Under the Income Tax Act, 1961, Section 260A, provided an appellate remedy from an order passed by the Appellate Tribunal, to the jurisdictional High Court. Similarly Section 129A of the Customs Act, 1962, and Section 35G of the Central Excise Act, 1944, provided for an appellate remedy from the concerned Appellate Tribunal to the High Court. The jurisdictional High Court would hear appeals on questions of law, against orders passed by the Appellate Tribunals. It is, therefore apparent, that right from the beginning, well before the promulgation of the Constitution, the core judicial appellate functions, for adjudication of tax related disputes, were vested with the jurisdictional High Courts. The High Courts have traditionally, been exercising the jurisdiction to determine questions of law, under all the above tax legislations. In this view of the matter, it is not possible for us to conclude, that it was not justified for the learned counsel for the petitioners to contend, that the core judicial appellate function in tax matters, on questions of law, has uninterruptedly been vested with the jurisdictional High Courts.

Para 106: Before we proceed with the matter further, it is necessary to keep in mind the composition of the adjudicatory authorities which have historically dealt with the matters arising out of tax laws. First, we shall deal with the composition of the Appellate Tribunals. All Appellate Tribunals which are relevant for the present controversy were essentially comprised of Judicial Members, besides Accountant or Technical Members. To qualify for appointment as a Judicial Member, it was essential that the incumbent had held a judicial office in India for a period of 10 years, or had practiced as an Advocate for a similar period. It is the above qualification, which enabled the enactments to provide, by a fiction of law, that all the said Appellate Tribunals were discharging "judicial proceedings". The next stage of appellate determination, has been traditionally vested with the High Courts. The income-tax legislation, the customs legislation, as well as, the central excise legislation uniformly provided, that in exercise of its appellate jurisdiction, the jurisdictional High Court would adjudicate appeals arising out of orders passed by the respective Appellate Tribunals. The said appeals were by a legislative determination, to be heard by benches comprising of at least two judges of the High Court. Adjudication at the hands of a bench consisting of at least two judges, by itself is indicative of the legal complications, insofar as the appellate adjudicatory role, of the jurisdictional High Court was concerned. It would, therefore, not be incorrect to conclude, by accepting the submissions advanced at the hands of the learned counsel for the petitioners, that before and after promulgation of the Constitution, till the enactment of the NTT Act, all legislative provisions vested the appellate power of adjudication, arising out of the Income Tax Act, the Customs Act and the Excise Act, on questions of law, with the jurisdictional High Courts.

Para 124: One needs to also examine sub-sections (2), (3), (4) and (5) of Section 5 of the NTT Act, with pointed reference to the role of the Central Government in determining the sitting of benches of the NTT. The Central Government has been authorized to notify the area in relation to which each bench would exercise jurisdiction, to determine the constitution of the benches, and finally, to exercise the power of transfer of Members of one bench to another bench. One cannot lose sight of the fact, that the Central Government will be a stakeholder in each and every appeal/case, which would be filed before the NTT. It cannot, therefore, be appropriate to allow the Central Government to play any role, with reference to the places where the benches would be set up, the areas over which the benches would exercise jurisdiction, the composition and the constitution of the benches, as also, the transfer of the Members from one bench to another. It would be inappropriate for the Central Government, to have any administrative dealings with the NTT or its Members. In the jurisdictional High Courts, such power is exercised exclusively by the Chief Justice, in the best interest of the administration of justice. Allowing the Central Government to participate in the aforestated administrative functioning of the NTT, in our view, would impinge upon the independence and fairness of the Members of the NTT. For the NTT Act to be valid, the Chairperson and Members of the NTT should be possessed of the same independence and security, as the judges of the jurisdictional High Courts (which the NTT is mandated to substitute). Vesting of the power of determining the jurisdiction, and the postings of different Members, with the Central Government, in our considered view, would undermine the independence and fairness of the Chairperson and the Members of the NTT, as they would always be worried to preserve their jurisdiction based on their preferences/inclinations in terms of work, and conveniences in terms of place of posting. An unsuitable/disadvantageous Chairperson or Member could be easily moved to an insignificant jurisdiction, or to an inconvenient posting. This could be done to chastise him, to accept a position he would not voluntarily accede to. We are, therefore of the considered view, that Section 5 of the NTT Act is not sustainable in law, as it does not ensure that the alternative adjudicatory authority, is totally insulated from all forms of interference, pressure or influence from co-ordinate branches of Government. There is therefore no alternative, but to hold that sub-sections (2), (3), (4) and (5) of Section 5 of the NTT Act are unconstitutional.

Para 125: We shall now examine the validity of Section 6 of the NTT Act. The above provision has already been extracted in an earlier part of this judgment, while dealing with the submissions advanced on behalf of the petitioners, with reference to the fourth contention. A perusal of Section 6 reveals, that a person would be qualified for appointment as a Member, if he is or has been a Member of the Income Tax Appellate Tribunal or of the Customs, Excise and Service Tax Appellate Tribunal for at least 5 years. While dealing with the historical perspective, with reference to the Income Tax legislation, the Customs legislation, as also, the Central Excise legislation, we have noticed the eligibility of those who can be appointed as Members of the Appellate Tribunals constituted under the aforesaid legislations. Under the Income Tax Act, a person who has practiced in accountancy as a Chartered Accountant (under the Chartered Accountants Act, 1949) for a period of 10 years, or has been a Registered Accountant (or partly a Registered Accountant, and partly a Chartered Accountant) for a period of 10 years, is eligible to be appointed as an Accountant Member. Under the Customs Act and the Excise Act, a person who has been a member of the Indian Customs and Central Excise Service (Group A), subject to the condition, that such person has held the post of Collector of Customs or Central Excise (Level I), or equivalent or higher post, for at least 3 years, is eligible to be appointed as a Technical Member. It is apparent from the narration recorded hereinabove, that persons with the above qualifications, who were appointed as Accountant Members or Technical Members in the respective Appellate Tribunals, are also eligible for appointment as Members of the NTT, subject to their having rendered specified years service as such. The question to be determined is, whether persons with the aforesaid qualifications, satisfy the parameters of law declared by this Court, to be appointed as, Members of the NTT? And do they satisfy the recognized constitutional conventions?

Para 126: This Court has declared the position in this behalf in L. Chandra Kumar case (supra) and in Union of India V/s. Madras Bar Association case (supra), that Technical Members could be appointed to the tribunals, where technical expertise is essential for disposal of matters, and not otherwise. It has also been held, that where the adjudicatory process transferred to a tribunal does not involve any specialized skill, knowledge or expertise, a provision for appointment of non-Judicial Members (in addition to, or in substitution of Judicial Members), would constitute a clear case of delusion and encroachment upon the "independence of judiciary", and the "rule of law". It is difficult to appreciate how Accountant Members and Technical Members would handle complicated questions of law relating to tax matters, and also questions of law on a variety of subjects (unconnected to tax), in exercise of the jurisdiction vested with the NTT. That in our view would be a tall order. An arduous and intimidating asking. Since the Chairperson/Members of the NTT will be required to determine "substantial questions of law", arising out of decisions of the Appellate Tribunals, it is difficult to appreciate how an individual, well-versed only in accounts, would be able to discharge such functions. Likewise, it is also difficult for us to understand how Technical Members, who may not even possess the qualification of law, or may have no experience at all in the practice of law, would be able to deal with "substantial questions of law", for which alone, the NTT has been constituted.

Para 127: We have already noticed hereinabove, from data placed on record by the learned counsel for the petitioners, that the NTT would be confronted with disputes arising out of Family Law, Hindu Law, Mohemmedan Law, Company Law, Law of Partnership, Law relating to Territoriality, Law relating to Trusts and Societies, Contract Law, Law relating to Transfer of Property, Law relating to Intellectual Property, Interpretation of Statutes/Rules, and other Miscellaneous Provisions of Law. Besides the above, the Members of the NTT will regularly have to interpret the provisions of the Income Tax Act, the Customs Act and the Excise Act. We are of the considered opinion, that only a person possessing professional qualification in law, with substantial experience in the practice of law, will be in a position to handle the onerous responsibilities which a Chairperson and Members of the NTT will have to shoulder.

Para 128: There seems to be no doubt, whatsoever, that the Members of a court/tribunal to which adjudicatory functions are transferred, must be manned by judges/members whose stature and qualifications are commensurate to the court from which the adjudicatory process has been transferred. This position is recognized the world over. Constitutional conventions in respect of Jamaica, Ceylon, Australia and Canada, on this aspect of the matter have been delineated above. The opinion of the Privy Council expressed by Lord Diplock in Hind case (supra), has been shown as being followed in countries which have constitutions on the Westminster model. The Indian Constitution is one such Constitution. The position has been clearly recorded while interpreting constitutions framed on the above model, namely, that even though the legislature can transfer judicial power from a traditional court, to an analogous court/tribunal with a different name, the court/tribunal to which such power is transferred, should be possessed of the same salient characteristics, standards and parameters, as the court the power whereof was being transferred. It is not possible for us to accept, that Accountant Members and Technical Members have the stature and qualification possessed by judges of High Courts.

Para 129: It was not disputed, that the NTT has been created to handle matters which were earlier within the appellate purview of the jurisdictional High Courts. We are accordingly satisfied, that the appointment of Accountant Members and Technical Members of the Appellate Tribunals to the NTT, would be in clear violation of the constitutional conventions recognized by courts, the world over. References on questions of law (under the three legislative enactments in question), were by a legislative mandate, required to be adjudicated by a bench of at least two judges of the jurisdictional High Court. When the remedy of reference (before the High Court) was converted into an appellate remedy (under the three legislative enactments in question), again by a legislative mandate, the appeal was to be heard by a bench of at least two judges, of the jurisdictional High Court. One cannot lose sight of the fact, that hitherto before, the issues which will vest in the jurisdiction of the NTT, were being decided by a bench of at least two judges of the High Court. The onerous and complicated nature of the adjudicatory process is clear.

We may also simultaneously notice, that the power of "judicial review" vested in the High Courts under Articles 226 and 227 of the Constitution has not been expressly taken away by the NTT Act. During the course of hearing, we had expressed our opinion in respect of the power of "judicial review" vested in the High Courts under Articles 226 and 227 of the Constitution. In our view, the power stood denuded, on account of the fact that, Section 24 of the NTT Act vested with an aggrieved party, a remedy of appeal against an order passed by the NTT, directly to the Supreme Court. Section 24 aforementioned is being extracted hereunder:

"24. Appeal to Supreme Court.- Any person including any department of the Government aggrieved by any decision or order of the National Tax Tribunal may file an appeal to the Supreme Court within sixty days from the date of communication of the decision or order of the National Tax Tribunal to him:

Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within such time as it may deem fit."

In view of the aforestated appellate remedy, from an order passed by the NTT directly to the Supreme Court, there would hardly be any occasion, to raise a challenge on a tax matter, arising out of the provisions of the Income Tax Act, the Customs Act and the Excise Act, before a jurisdictional High Court. Even though the learned Attorney General pointed out, that the power of "judicial review" under Articles 226 and 227 of the Constitution had not been taken away, yet he acknowledged, that there would be implicit limitations where such power would be exercisable. Therefore, all the more, the composition of the NTT would have to be on the same parameters as judges of the High Courts. Since the appointments of the Chairperson/Members of the NTT are not on the parameters expressed hereinabove, the same are unsustainable under the declared law. A perusal of Section 6 of the NTT Act leaves no room for any doubt, that none of the above parameters is satisfied insofar as the appointment of Chairperson and other Members of the NTT is concerned. In the above view of the matter, Section 6(2)(b) of the NTT Act is liable to be declared unconstitutional. We declare it to be so.

Para 130: We would now deal with the submissions advanced by the learned counsel for the petitioners in respect of Section 7 of the NTT Act. It seems to us, that Section 7 has been styled in terms of the decision rendered by this Court in L. Chandra Kumar case (supra). Following the above judgment for determining the manner of selection of the Chairperson and Members of the NTT, is obviously a clear misunderstanding of the legal position declared by this Court. It should not have been forgotten, that under the provisions of the Administrative Tribunals Act, 1985, which came up for consideration in L. Chandra Kumar case (supra), the tribunals constituted under the said Act, are to act like courts of first instance. All decisions of the tribunal are amenable to challenge under Articles 226/227 of the Constitution before, a division bench of the jurisdictional High Court. In such circumstances it is apparent, that tribunals under the Administrative Tribunals Act, 1985, were subservient to the jurisdictional High Courts.

The manner of selection, as suggested in L. Chandra Kumar case (supra) cannot therefore be adopted for a tribunal of the nature as the NTT. Herein the acknowledged position is, that the NTT has been constituted as a replacement of High Courts. The NTT is, therefore, in the real sense a tribunal substituting the High Courts.

The manner of appointment of Chairperson/Members to the NTT will have to be, by the same procedure (or by a similar procedure), to that which is prevalent for appointment of judges of High Courts.

Insofar as the instant aspect of the matter is concerned, the above proposition was declared by this Court in Union of India V/s. Madras Bar Association case (supra), wherein it was held, that the stature of the Members who would constitute the tribunal, would depend on the jurisdiction which was being transferred to the tribunal. Accordingly, if the jurisdiction of the High Courts is being transferred to the NTT, the stature of the Members of the tribunal had to be akin to that of the judges of High Courts. So also the conditions of service of its Chairperson/Members. And the manner of their appointment and removal, including transfers. Including, the tenure of their appointments.

Para 131: Section 7 cannot even otherwise, be considered to be constitutionally valid, since it includes in the process of selection and appointment of the Chairperson and Members of the NTT, Secretaries of Departments of the Central Government. In this behalf, it would also be pertinent to mention, that the interests of the Central Government would be represented on one side, in every litigation before the NTT. It is not possible to accept a party to a litigation, can participate in the selection process, whereby the Chairperson and Members of the adjudicatory body are selected. This would also be violative of the recognized constitutional convention recorded by Lord Diplock in Hinds case (supra), namely, that it would make a mockery of the constitution, if the legislature could transfer the jurisdiction previously exercisable by holders of judicial offices, to holders of a new court/tribunal (to which some different name was attached) and to provide that persons holding the new judicial offices, should not be appointed in the manner and on the terms prescribed for appointment of Members of the judicature. For all the reasons recorded hereinabove, we hereby declare Section 7 of the NTT Act, as unconstitutional.

Para 132: Insofar as the validity of Section 8 of the NTT Act is concerned, it clearly emerges from a perusal thereof, that a Chairperson/Member is appointed to the NTT, in the first instance, for a duration of 5 years. Such Chairperson/Member is eligible for reappointment, for a further period of 5 years. We have no hesitation to accept the submissions advanced at the hands of the learned counsel for the petitioners, that a provision for reappointment would itself have the effect of undermining the independence of the Chairperson/Members of the NTT. Every Chairperson/Member appointed to the NTT, would be constrained to decide matters, in a manner that would ensure his reappointment in terms of Section 8 of the NTT Act. His decisions may or may not be based on his independent understanding. We are satisfied, that the above provision would undermine the independence and fairness of the Chairperson and Members of the NTT. Since the NTT has been vested with jurisdiction which earlier lay with the High Courts, in all matters of appointment, and extension of tenure, must be shielded from executive involvement. The reasons for our instant conclusions are exactly the same as have been expressed by us while dealing with Section 5 of the NTT Act. We therefore hold, that Section 8 of the NTT Act is unconstitutional.

Para 166: The stage is now set for the Attorney General s reliance on Union of India V/s. R. Gandhi (2010) 11 SCC 1.

Various provisions of the Companies Act, 1956 were under challenge before the Constitution Bench. The effect of these provisions was to replace the Company Law Board by a Tribunal vested with original jurisdiction, and to replace the High Court in First Appeal with an appellate tribunal. After noticing the difference between courts and tribunals in paras 38 and 45, the court referred to the independence of the judiciary and to the separation of powers doctrine, as understood in the Indian Constitutional Context in paras 46 to 57. In a significant statement of the law, the Constitution Bench said:

"The Constitution contemplates judicial power being exercised by both courts and tribunals. Except the powers and jurisdiction vested in superior courts by the Constitution, powers and jurisdiction of courts are controlled and regulated by legislative enactments. The High Courts are vested with the jurisdiction to entertain and hear appeals, revisions and references in pursuance of provisions contained in several specific legislative enactments. If jurisdiction of High Courts can be created by providing for appeals, revisions and references to be heard by the High Courts, jurisdiction can also be taken away by deleting the provisions for appeals, revisions or references. It also follows that the legislature has the power to create Tribunals with reference to specific enactments and confer jurisdiction on them to decide disputes in regard to matters arising from such special enactments. Therefore it cannot be said that legislature has no power to transfer judicial functions traditionally performed by courts to Tribunals." (para 87)

In another significant paragraph, the Constitution bench stated:

"But when we say that the legislature has the competence to make laws, providing which disputes will be decided by courts, and which disputes will be decided by tribunals, it is subject to constitutional limitations, without encroaching upon the independence of the judiciary and keeping in view the principles of the rule of law and separation of powers.

If tribunals are to be vested with judicial power hitherto vested in or exercised by courts, such tribunals should possess the independence, security and capacity associated with courts. If the tribunals are intended to serve an area which requires specialized knowledge or expertise, no doubt there can be technical members in addition to judicial members. Where however jurisdiction to try certain category of cases are transferred from courts to tribunals only to expedite the hearing and disposal or relieve from the rigours of the Evidence Act and procedural laws, there is obviously no need to have any non-judicial technical member.

In respect of such tribunals, only members of the judiciary should be the Presiding Officers/Members. Typical examples of such special tribunals are Rent Tribunals, Motor Accidents Claims Tribunals and Special Courts under several enactments.

Therefore, when transferring the jurisdiction exercised by courts to tribunals, which does not involve any specialized knowledge or expertise in any field and expediting the disposal and relaxing the procedure is the only object, a provision for technical members in addition to or in substitution of judicial members would clearly be a case of dilution of and encroachment upon the independence of the judiciary and the rule of law and would be unconstitutional."(at para 90)

The Bench then went on to hold that only certain areas of litigation can be transferred from courts to tribunals. (see para 92)

In paragraphs 101 and 102 the law is stated thus:

"Independent judicial tribunals for determination of the rights of citizens, and for adjudication of the disputes and complaints of the citizens, is a necessary concomitant of the rule of law. The rule of law has several facets, one of which is that disputes of citizens will be decided by Judges who are independent and impartial; and that disputes as to legality of acts of the Government will be decided by Judges who are independent of the executive. Another facet of the rule of law is equality before law. The essence of the equality is that it must be capable of being enforced and adjudicated by an independent judicial forum. Judicial independence and separation of judicial power from the executive are part of the common law traditions implicit in a Constitution like ours which is based on the Westminster model.

The fundamental right to equality before law and equal protection of laws guaranteed by Art.14 of the Constitution, clearly includes a right to have the person s rights, adjudicated by a forum which exercises judicial power in an impartial and independent manner, consistent with the recognized principles of adjudication.

Therefore wherever access to courts to enforce such rights is sought to be abridged, altered, modified or substituted by directing him to approach an alternative forum, such legislative act is open to challenge if it violates the right to adjudication by an independent forum. Therefore, though the challenge by MBA is on the ground of violation of principles forming part of the basic structure, they are relatable to one of more of the express provisions of the Constitution which gave rise to such principles. Though the validity of the provisions of a legislative act cannot be challenged on the ground it violates the basic structure of the Constitution, it can be challenged as violative of constitutional provisions which enshrine the principles of the rule of law, separation of powers and independence of the judiciary."

Para 167: Gandhi s case dealt with one specialized tribunal replacing another specialized tribunal (The Company Law Board) at the original stage. It is significant to note that the first appeal provided to the appellate tribunal is not restricted only to questions of law. It is a full first appeal as understood in the section 96 CPC sense (See section 10FQ of the Companies Act). A further appeal is provided to the Supreme Court under Section 10GF only on questions of law. When Gandhi s case states in paragraph 87 that the jurisdiction of the High Courts can be taken away by deleting provisions for appeals, revisions or references, and that these functions traditionally performed by courts can be transferred to tribunals, the court was only dealing with the situation of the High Court being supplanted at the original and first appellate stage so far as the company `jurisdiction is concerned in a situation where questions of fact have to be determined afresh at the first appellate stage as well. These observations obviously cannot be logically extended to cover a situation like the present where the High Court is being supplanted by a tribunal which would be deciding only substantial questions of law.

Para 168: The present case differs from Gandhi s case in a very fundamental manner. The National Tax Tribunal which replaces the High Courts in the country replaces them only to decide substantial questions of law which relate to taxation. In fact, a Direct Tax Laws Committee delivered a report in 1978 called the Choksi Committee after its Chairman. This report had in fact recommended that a Central Tax Court should be set up. The report stated:

"?II-6.10. In paragraph 11.30 of our Interim Report, we had expressed the view that the Government should consider the establishment of a Central Tax Court to deal with all matters arising under the Income-tax Act and other Central Tax Laws, and had left the matter for consideration in greater detail in our Final Report. We have since examined the matter from all aspects.

II-6.11. The problem of tax litigation in India has assumed staggering proportions in recent years. From the statistics supplied to us, it is seen that, as on 30th June, 1977, there were as many as 10,500 references under the direct tax laws pending with the various High Courts, the largest pendency being in Bombay, Calcutta, Madras, Karnataka and Madhya Pradesh. The number of references made to the High Courts in India under all the tax laws is of the order of about 3,300 in a year, whereas the annual disposals of such references by all the High Courts put together amount to about 600 in a year. In addition to these references, about 750 writ petitions on tax matters are also filed before the High Courts every year. Under the existing practice of each High Court having only a single bench for dealing with the tax matters and that too not all round the year, there is obviously no likelihood of the problem being brought down to manageable proportions at any time in, the future, but, on the other hand, it is likely to become worse. Even writ petitions seeking urgent remedy against executive action take several years for disposal. The Wanchoo Committee, which had considered this problem, recommended the creation of permanent Tax Benches in High Courts and appointment of retired Judges to such Benches under Article 224A of the Constitution to clear the backlog. Although more than 6 years have passed since that recommendation was made, the position of arrears in tax matters has shown no improvement but, on the other hand, it has worsened. In this connection, it would be worth noting that the Wanchoo Committee considered an alternative course for dealing with this problem through the establishment of a Tax Court but they desisted from making any recommendation to that effect us, in their opinion, that would involve extensive amendments to law and procedures. We have directed our attention to this matter in the context of the mounting arrears of tax cases before the courts.

II-6.12. The pendency of cases before the courts in tax matters has also a snow-balling effect all along the line of appellate hierarchies inasmuch as proceedings in hundreds of cases are initiated and kept pending, awaiting the law to be finally settled by the Supreme Court after prolonged litigation in some other cases. This obviously adds considerably to the load of infructuous word in the Department and clutters up the files of appellate authorities at all levels, with adverse consequences on their efficiency. According to the figures supplied to us, out of tax arrears amounting to Rs.986.53 crores as on 31st December, 1977, Rs.293.26 crores (30 per cent) were disputed in proceedings before various appellate authorities and courts.

II-6.13. Apart from the delays which are inherent in the existing system, the jurisdiction pattern of the High Courts also seems to contribute to the generation of avoidable work. At present, High Courts are obliged to hear references on matters falling within their jurisdiction notwithstanding that references on identical points have been decided by other High Courts. The decision of one High Court is not binding on another High Court even on identical issues. Finality is reached only when the Supreme Court decides the issue which may take 10 to 15 years.

II-6.14. Tax litigation is currently handled by different Benches of the High Courts constituted on an ad hoc basis. The absence of permanent benches also accounts for the delay in the disposal of the tax cases by High Courts.

II-6.15. The answer to these problems, in our view, is the establishment of a Central Tax Court with all-India jurisdiction to deal with such litigation to the exclusion of High Courts. Such a step will have several advantages. In the first place, it would lead to uniformity in decisions and bring a measure of certainty in tax matters. References involving common issues can be conveniently consolidated and disposed of together, thereby accelerating the pace of disposal. Better co-ordination among the benches would make for speedy disposal of cases and reduce the scope for proliferation of appeals on the same issues before the lower appellate authorities, which in its turn will reduce the volume of litigation going up before the Tax Court as well. Once a Central Tax Court is established, the judges appointed to the Benches thereof will develop the requisite expertise by continuous working in this field. This would facilitate quicker disposal of tax matters and would also help in reducing litigation by ensuring uniformity in decisions.

II-6.16. In the light of the foregoing discussions, we recommend that the Government should take steps for this early establishment of a Central Tax Court with all-India jurisdiction to deal exclusively with litigation under the direct Tax laws in the first instance, with provisions for extending its jurisdiction to cover all other Central Tax laws, if considered necessary in the future. We suggest that such a court should be constituted under a separate statute. As the implementation of this recommendation may necessitate amendment of the constitution, which is likely to take time, we further recommend that Government may in the meanwhile, consider the desirability of constituting special Tax benches in the High Courts to deal with the large number of Tax cases by continuously sitting throughout the year. The Judges to be appointed to these special benches may be selected from among those, who have special knowledge and experience in dealing with matters relating to direct Tax laws so that, when the Central Tax Court is established at a later date, these judges could be transferred to that Court.

II-6.17. The Central Tax Court should have Benches located at important centres. To start with it may have Benches at the following seven places, viz., Ahmedabad, Bombay, Calcutta, Delhi, Kanpur, Madras and Nagpur. Each Bench should consist of two judges. Highly qualified persons should be appointed as judges of the Central Tax Court, from among persons who are High Court judges or who are eligible to be appointed as High Court judges. In the matter of conditions of service, scales or pay and other privileges, judges of the Central Tax Court should be on par with the High Court judges.

II-6.18. The Supreme Court and, following it, the High Courts have held that the Tribunal and the tax authorities, being creatures of the Act cannot pronounce on the constitutional validity or vires of any provision of the Act; that; therefore, such a question cannot arise out of the order of the Tribunal and cannot be made the subject matter of a reference to the High Court and a subsequent appeal to the Supreme court; and that such a question of validity or vires can be raised only in a suit or a writ petition. While an income-tax authority or the Tribunal cannot decide upon the validity or vires of the other provisions of the law. We recommend that the powers of the Central Tax Court in this regard should be clarified in the law itself by specifically giving it the right to go into questions of validity of the provisions of the Tax Laws or of the rules framed thereunder.

II-6.19. Another important matter, in which we consider that the present position needs improvement, is the nature of the Court s jurisdiction in tax matters. Under the present law, the High Court s jurisdiction in such matters is merely advisory on questions of law. For this purpose, the Appellate Tribunal has to draw up a statement of the case and refer the same to the High Court for its opinion. After the High Court delivers its judgment on the reference, the matter goes back to the Tribunal, which has then to pass such orders as are necessary to dispose of the case conformably to such judgment. Under this procedure, the aggrieved party before the Tribunal has to file an application seeking a reference to the High Court on specified questions of law arising out of the Tribunal s order. The hearing of such application by the Tribunal, followed by the drawing up of the statement of the case to the High Court, delays the consideration of the issue by the High Court for a considerable time. Where the Tribunal refuses to state the case as sought by the applicant, then again, the law provides for a direct approach to the High Court for issue of directions to the Appellate Tribunal to state the case to the High Court on the relevant question of law. This process also delays the consideration of the matter by the High court for quite some time. In addition to these types of delay, there will be further delays after the High Court decides the matter, as the Tribunal has to pass consequential orders disposing of the case, before the relief, if any due, can be granted to the assessee.

II-6.20. In our view, the disposal of tax litigation can be speeded up considerably by vesting jurisdiction in the proposed Central Tax Court to hear appeals against the orders of the Tribunal on questions of law arising out of such orders. We, accordingly, recommend that the jurisdiction of the Central Tax Court should be Appellate and not advisory. We also recommend that appeals before the Central Tax Court should be heard by a Bench of two judges. The judgment of a division Bench should be binding on other division Benches of the Tax Court unless it is contrary to a decision of the Supreme Court or of a full Bench of the Tax Court.

II-6.21. In the matter of appeals before the Central Tax Court, it would be necessary to make a special provision for enabling Chartered Accountants to appear on behalf of appellants or respondents to argue the appeals before it. Legal practitioners would, in any event, be entitled to appear before the Central Tax Court. In addition, any other person, who may be permitted by the Court to appear before it, may also represent the appellant or the respondent in tax matters.

II-6.22. Our recommendation for setting up of a Central Tax Court may not be interpreted to be only a modified version of the concept of administrative and other tribunals authorized to be set up for various purposes under the amendments effected by the 42nd Amendment of the Constitution. The Central Tax Court, which we have in view, will be a special kind of High court with functional jurisdiction over tax matters and enjoying judicial independence in the same manner as the High Courts. The controversy generated by the 42nd Amendment to the Constitution should not, therefore, be held to militate against the proposal for the establishment of a Central Tax Court to exercise the functions of a High Court in tax matters."

This recommendation was not acceded to by Parliament.

Para 169: It is obvious, that substantial questions of law which relate to taxation would also involve many areas of civil and criminal law, for example Hindu Joint Family Law, partnership, sale of goods, contracts, Mohammedan Law, Company Law, Law relating to Trusts and Societies, Transfer of Property, Law relating to Intellectual Property, Interpretation of Statutes and sections dealing with prosecution for offences. It is therefore not correct to say that taxation, being a specialized subject, can be dealt with by a tribunal. All substantial questions of law have under our constitutional scheme to be decided by the superior courts and the superior courts alone. Indeed, one of the objects for enacting the National Tax Tribunals Act, as stated by the Minister on the floor of the House, is that the National Tax Tribunal can lay down the law for the whole of India which then would bind all other authorities and tribunals. This is a direct encroachment on the High Courts power under Art. 227 to decide substantial questions of law which would bind all tribunals vide East India Commercial Co. case, supra.

ACCESS TO COURTS

Para 123: We shall first examine the validity of Section 5 of the NTT Act. The basis of challenge to the above provision, has already been narrated by us while dealing with the submissions advanced on behalf of the petitioners, with reference to the fourth contention. According to the learned counsel for the petitioners, Section 5(2) of the NTT Act mandates, that the NTT would ordinarily have its sittings in the National Capital Territory of Delhi.

According to the petitioners, the aforesaid mandate would deprive the litigating assessee, the convenience of approaching the jurisdictional High Court in the State, to which he belongs. An assessee may belong to a distant/remote State, in which eventuality, he would not merely have to suffer the hardship of traveling a long distance, but such travel would also entail uncalled for financial expense. Likewise, a litigant assessee from a far-flung State may find it extremely difficult and inconvenient to identify an Advocate who would represent him before the NTT, since the same is mandated to be ordinarily located in the National Capital Territory of Delhi.

Even though we have expressed the view, that it is open to the Parliament to substitute the appellate jurisdiction vested in the jurisdictional High Courts and constitute courts/tribunals to exercise the said jurisdiction, we are of the view, that while vesting jurisdiction in an alternative court/tribunal, it is imperative for the legislature to ensure, that redress should be available, with the same convenience and expediency, as it was prior to the introduction of the newly created court/tribunal.

Thus viewed, the mandate incorporated in Section 5(2) of the NTT Act to the effect that the sittings of the NTT would ordinarily be conducted in the National Capital Territory of Delhi, would render the remedy inefficacious, and thus unacceptable in law. The instant aspect of the matter was considered by this Court with reference to the Administrative Tribunals Act, 1985, in S.P. Sampath Kumar case (supra) and L. Chandra Kumar case (supra), wherein it was held, that permanent benches needed to be established at the seat of every jurisdictional High Court. And if that was not possible, at least a circuit bench required to be established at every place where an aggrieved party could avail of his remedy. The position on the above issue, is no different in the present controversy. For the above reason, Section 5(2) of the NTT Act is in clear breach of the law declared by this Court.

Sandeep Jalan

Advocate

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