Supreme Court Overrules Key Aspects of Finance Act 2017 on Tribunal Appointments and Powers: Rojer Mathew vs. South Indian Bank Ltd. (2019) INSC 877 (13 November 2019)

Introduction

Date of the Judgment: 13 November 2019

Citation: (2019) INSC 877

Judges: Ranjan Gogoi, CJI; N.V. Ramana, J; Dr. Dhananjaya Y Chandrachud, J; Deepak Gupta, J; Sanjiv Khanna, J (Majority opinion by Ranjan Gogoi, CJI, with concurring and dissenting opinions)

Can the government bypass established judicial norms while appointing members to tribunals? The Supreme Court recently addressed this crucial question, examining the constitutional validity of the Finance Act, 2017, which significantly altered the appointment process and powers of various tribunals. This judgment scrutinizes the balance of power between the legislature, executive, and judiciary in the context of tribunal appointments.

Case Background

The case originated from a batch of petitions challenging the constitutionality of Part XIV of the Finance Act, 2017. This part of the Act amended 25 different statutes, impacting the qualifications, appointments, terms of office, and other service conditions of members and presiding officers of various statutory tribunals. The lead matter was an appeal by Rojer Mathew, who had challenged the validity of Section 13(5-A) of the SARFAESI Act, 2002, which allows secured creditors to participate in auctions of immovable property. During the arguments, the Court also took cognizance of the broader issue of appointments to Debt Recovery Tribunals. Additionally, a Public Interest Litigation (PIL) was filed by Kudrat Sandhu, challenging the vires of Part XIV of the Finance Act, 2017.

Timeline

Course of Proceedings

The High Court of Kerala had initially heard the matter filed by Rojer Mathew. During the course of arguments, it was brought to the notice of the Supreme Court that appointments to the Debt Recovery Tribunals were not in consonance with the Constitutional spirit of judicial independence. The matter was then referred to a larger bench to address broader issues concerning the restructuring of tribunals.

Legal Framework

The judgment primarily discusses the constitutional validity of Part XIV of the Finance Act, 2017, which amended several statutes related to tribunals. The relevant legal provisions include:

• Article 110 of the Constitution of India: Defines a “Money Bill” and the procedures for its passage.
• Articles 323A and 323B of the Constitution of India: Empower Parliament and State Legislatures to establish tribunals for specific matters.
• Section 184 of the Finance Act, 2017: Empowers the Central Government to make rules regarding qualifications, appointments, terms of office, salaries, and other service conditions of tribunal members.

The Court also considered the Administrative Tribunals Act, 1985, the National Green Tribunal Act, 2010, and various other statutes that establish and govern specific tribunals.

Arguments

Petitioners’ Arguments:

• The Finance Act, 2017, particularly Part XIV, was not a “money bill” under Article 110 of the Constitution, as it contained provisions beyond financial matters.
• The Act’s provisions violated the independence of the judiciary by giving the executive excessive control over tribunal appointments.
• Section 184 of the Finance Act, 2017, suffered from excessive delegation by empowering the Central Government to make rules on qualifications and conditions of service without adequate guidelines.
• The Act terminated the services of existing tribunal members, which was an interference with judicial independence.

Union of India’s Arguments:

• The Finance Act, 2017, aimed to rationalize the functioning of tribunals and ensure uniformity in service conditions.
• The amendments were necessary to address inconsistencies in qualifications, appointments, and tenures across different tribunals.
• The Speaker’s decision on a bill’s nature as a money bill was final and not subject to judicial review.
• The amendments were incidental to the financial proposals of the Central Government and hence, were validly included in the Finance Act.

The petitioners argued that the term “only” in Article 110(1) was deliberately incorporated in the Constitution to limit the scope of a money bill.

Sub-Submissions

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the ‘Finance Act, 2017’ insofar as it amends certain other enactments and alters conditions of service of persons manning different Tribunals can be termed as a ‘money bill’ under Article 110 and consequently is validly enacted?
2. If the answer to the above is in the affirmative then Whether Section 184 of the Finance Act, 2017 is unconstitutional on account of Excessive Delegation?
3. If Section 184 is valid, Whether Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 are in consonance with the Principal Act and various decisions of this Court on functioning of Tribunals?
4. Whether there should be a Single Nodal Agency for administration of all Tribunals?
5. Whether there is a need for conducting a Judicial Impact Assessment of all Tribunals in India?
6. Whether judges of Tribunals set up by Acts of Parliament under Articles 323-A and 323-B of the Constitution can be equated in ‘rank’ and ‘status’ with Constitutional functionaries?
7. Whether direct statutory appeals from Tribunals to the Supreme Court ought to be detoured?
8. Whether there is a need for amalgamation of existing Tribunals and setting up of benches.

Treatment of the Issue by the Court

Authorities

The Court relied on the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Jaswant Sugar Mills Ltd., Meerut vs. Lakshmichand [AIR 1963 SC 677]: Used to define the key characteristics of a tribunal.
• Associated Cement Co. Ltd. v. PN Sharma [AIR 1965 SC 1595]: Used to highlight that tribunals share a judicial character with courts.
• R.K. Jain vs. Union of India [(1993) 4 SCC 119]: Used to emphasize the need for legal expertise and judicial experience in tribunals.
• L. Chandra Kumar v. Union of India [(1997) 3 SCC 261]: Used to emphasize the need for a single nodal ministry and judicial review.
• Union of India vs. R. Gandhi, President, Madras Bar Association [(2010) 11 SCC 1]: Used to emphasize the need for independence, security, and capacity of tribunals.
• Madras Bar Association vs. Union of India [(2014) 10 SCC 1]: Used to emphasize that members of tribunals must be akin to judges of the Courts they substitute.
• Madras Bar Association vs. Union of India [(2015) 8 SCC 583]: Used to emphasize the need for curing defects in accordance with the dictum of R. Gandhi.
• Gujarat Urja Vikas Ltd. vs. Essar Power Ltd. [(2016) 9 SCC 103]: Used to reiterate the earlier decisions in L. Chandra Kumar and Madras Bar Association.
• MSM Sharma vs. Dr. Shree Krishna Sinha [AIR 1959 SC 395]: Used to highlight that legislative business cannot be invalidated even if not in compliance with law.
• Raja Ram Pal v. Lok Sabha [(2007) 3 SCC 184]: Used to emphasize that judicial review is not barred on the grounds of illegality or unconstitutionality.
• Union of India v. Jyoti Prakash Mitter [(1971) 1 SCC 396]: Used to emphasize that even final decisions can be reviewed for collateral considerations or violation of natural justice.
• Mohd. Saeed Siddiqui vs. State of Uttar Pradesh [(2014) 11 SCC 415]: Overruled to the extent that it placed decisions of the Speaker beyond judicial review.
• Yogendra Kumar Jaiswal vs. State of Bihar [(2016) 3 SCC 183]: Overruled to the extent that it placed decisions of the Speaker beyond judicial review.
• K.S. Puttaswamy (Retd.) and Anr. v. Union of India [(2019) 1 SCC 1]: Used to analyze the scope of Article 110 and the meaning of the word “only.”
• R (Jackson) vs. Attorney General [[2005] UKHL 56]: Used to highlight that interpretation of statutes dealing with legislative processes fall within the domain of the Courts.
• Devi Das Gopal Krishnan & Ors v. State of Punjab & Ors [AIR 1967 SC 1895]: Used to emphasize that the legislature must lay down policy and not confer arbitrary power on the executive.
• Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi and Another [AIR 1968 SC 1232]: Used to emphasize that the nature of the body to which delegation is made is a relevant factor.
• M.K. Papiah & Sons v. Excise Commissioner [(1975) 1 SCC 492]: Used to emphasize that the delegate cannot switch the policy of the legislation.
• Avinder Singh v. State of Punjab [(1979) 1 SCC 137]: Used to emphasize that while essential legislative policy cannot be delegated, inessentials can be.
• Registrar of Coop. Societies v. K. Kunjabmu [(1980) 1 SCC 340]: Used to emphasize that the legislature may guide the delegate by the express provision empowering delegation or the other provisions of the statute.
• Keshavlal Khemchand and Son Private Limited & Others v. Union of India [(2015) 4 SCC 770]: Used to emphasize that if the parent enactment enunciates the legislative policy with sufficient clarity, delegation of the power to make subordinate legislation is permissible.
• Gwalior Rayon Silk Mfg. (Wvg.) Co. v. Asstt. Commissioner of Sales [(1974) 4 SCC 98]: Used to emphasize that the law-making power may not be granted to an administrative body to be exercised under the guise of administrative discretion.

What weighed in the mind of the Court?

The Supreme Court’s reasoning was heavily influenced by the need to uphold judicial independence and the constitutional scheme of separation of powers. The Court was concerned about the erosion of judicial standards in tribunal appointments and the lack of a robust mechanism to ensure fairness and transparency. The Court also emphasized the need for tribunals to be effective substitutes for courts, which requires qualified and independent members.

The following table demonstrates the ranking of sentiment analysis of reasons given by the Supreme Court as to what weighed in the mind of the court to come to the conclusion with the various points emphasised in the reasoning portion:

Fact:Law Ratio

The Court’s reasoning was primarily based on legal principles and constitutional interpretation, with a lesser emphasis on the specific facts of the case.

Logical Reasoning

Judgment

The Supreme Court, in its majority opinion, held that:

• The issue of whether the Finance Act, 2017, was a valid money bill was referred to a larger bench for further consideration.
• Section 184 of the Finance Act, 2017, did not suffer from excessive delegation.
• The Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, were struck down for violating the principles of judicial independence and being inconsistent with previous judgments.
• The Central Government was directed to reformulate the rules in accordance with the principles laid down by the Court.
• A single nodal agency should be established for the administration of all tribunals.
• A judicial impact assessment of all tribunals should be conducted.
• Judges of tribunals cannot be equated with Constitutional functionaries in rank and status.
• Direct statutory appeals from tribunals to the Supreme Court should be detoured.
• There is a need for amalgamation ofexisting tribunals and setting up of benches.

Majority Opinion: The majority opinion, delivered by Ranjan Gogoi, CJI, focused on the need to preserve the independence of tribunals and ensure that they function as effective substitutes for courts.

Concurring Opinion: Justice Dr. Dhananjaya Y Chandrachud wrote a concurring opinion, agreeing with the majority’s conclusions but provided additional reasoning on the importance of judicial independence and the separation of powers.

Dissenting Opinion: There was no dissenting opinion in this case.

Impact of the Judgment

The judgment has significant implications for the functioning of tribunals in India. By striking down the 2017 Rules, the Supreme Court has reaffirmed the importance of judicial independence and the need for a transparent and fair appointment process. The directions given by the Court for the establishment of a single nodal agency and the conduct of a judicial impact assessment are aimed at improving the efficiency and effectiveness of tribunals.

The judgment has also raised questions about the scope of Article 110 of the Constitution and the powers of the Speaker of the Lok Sabha in determining whether a bill is a money bill. The reference of this issue to a larger bench indicates the importance of this issue and the need for a comprehensive and authoritative ruling.

The following table demonstrates the impact of the judgment on the legal landscape:

Conclusion

The Supreme Court’s judgment in Rojer Mathew vs. South Indian Bank Ltd. is a significant milestone in the jurisprudence of tribunal law in India. The Court has emphasized the importance of judicial independence, transparency, and fairness in the appointment and functioning of tribunals. The judgment has also highlighted the need for a comprehensive review of the tribunal system in India and the need for a robust mechanism to ensure that tribunals are effective substitutes for courts.

The reference of the issue of the validity of the Finance Act, 2017, as a money bill to a larger bench indicates the importance of this issue and the need for a comprehensive and authoritative ruling. The judgment serves as a reminder of the importance of the separation of powers and the need for a robust and independent judiciary.

In summary, the key takeaways of the judgment include:

• The issue of whether the Finance Act, 2017, was a valid money bill was referred to a larger bench.
• Section 184 of the Finance Act, 2017, was not unconstitutional due to excessive delegation.
• The Tribunal Rules of 2017 were struck down for violating judicial independence.
• Directions were given for a single nodal agency, a judicial impact assessment, and the amalgamation of tribunals.
• The importance of the separation of powers and judicial independence was reaffirmed.