- Bookmark
- Share
- CaseIQ
Madras Bar Association v. Union Of India .
Factual and Procedural Background
Multiple writ petitions were filed challenging the constitutional validity of the National Tax Tribunal Act, 2005 (“NTT Act”). In Transferred Case (Civil) No. 150 of 2006, the petitioners also assailed Section 46 of the Constitution (Forty-second Amendment) Act, 1976 and Article 323-B of the Constitution of India. Earlier, on 9 January 2007, a three-Judge Bench recorded several defects in the NTT Act and noted assurances from the Union of India that appropriate amendments would be considered. The matters were kept pending with liberty to the Union Government to seek listing after amendments were made.
On 21 January 2009, while a Constitution Bench was hearing Civil Appeals Nos. 3067 of 2004 and 3717 of 2005 concerning the National Company Law Tribunals, the present petitions were tagged with those appeals because it was thought that similar issues arose. After full hearing, the civil appeals were reserved and ultimately disposed of on the same day as the present order, reported in (2010) 11 SCC 1. Upon review, the Court found that the issues raised in the NTT matters—especially the direct challenge to Article 323-B—were distinct from those in the company-law appeals. Accordingly, the Court issued the present order delinking the NTT petitions for separate hearing.
Legal Issues Presented
- Whether the National Tax Tribunal Act, 2005 violates the basic structure of the Constitution by undermining the independence of the judiciary.
- Whether Section 46 of the Constitution (Forty-second Amendment) Act, 1976 is ultra vires for facilitating excessive proliferation of tribunals under executive control.
- Whether Article 323-B of the Constitution, in empowering legislatures to create tribunals with criminal jurisdiction and exclusive authority over pure questions of law, is itself unconstitutional.
- Whether specific provisions of the NTT Act—Sections 5(5), 7 and 13—are constitutionally valid in light of concerns about appointment procedures, transfer of members, and rights of representation.
Arguments of the Parties
Petitioners' Arguments
- Article 323-B and Section 46 of the Forty-second Amendment undermine the basic structure by allowing tribunals to replace High Courts, thereby diluting judicial independence.
- Tribunals are not bound by the Indian Evidence Act, 1872, yet Article 323-B would enable them to try criminal offences, risking convictions based on inadequate or inadmissible evidence.
- Sections 5(5), 7 and 13 of the NTT Act confer excessive executive control (e.g., member transfers, composition of the Selection Committee, and representation by “any person”).
Union of India's Submissions
- Section 13 would be amended so that only lawyers, chartered accountants, or parties in person could appear before the NTT.
- The phrase “consultation with the Chairperson” in Section 5(5) should be read as “concurrence of the Chairperson,” safeguarding judicial independence in transfer decisions.
- In the Selection Committee under Section 7, the Chief Justice of India or his nominee would have primacy, and this would be “duly clarified.”
- The Government would examine other pointed-out defects and introduce suitable amendments where necessary.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| L. Chandra Kumar v. Union of India, (1997) 3 SCC 261 | Considered the validity of Article 323-B(3)(d) concerning exclusion of High Court jurisdiction. | Cited to note that only a limited aspect of Article 323-B was previously examined; the broader validity now under challenge had not been decided. |
| CA Nos. 3067 of 2004 & 3717 of 2005, disposed of in (2010) 11 SCC 1 | Constitutional validity of Parts I-B and I-C of the Companies Act, 1956 (National Company Law Tribunals). | Referenced to explain that those appeals did not involve Article 323-B; hence their disposition could not govern the present petitions. |
Court's Reasoning and Analysis
The Court compared the grounds of challenge in the company-law appeals with those in the present petitions and found them fundamentally different. While the company appeals relied on Article 323-B only to argue that tribunals outside its enumerated subjects were impermissible, the NTT petitions mounted a direct attack on the constitutionality of Article 323-B itself as well as on Section 46 of the Forty-second Amendment. Because the earlier appeals did not confront these questions, adjudicating the NTT matters on the same footing would leave vital constitutional issues unresolved. The Court also noted the specific statutory defects alleged in the NTT Act, many of which the Union Government had promised to revisit, further differentiating these cases from the company-law matters.
Holding and Implications
ORDER: The petitions challenging the National Tax Tribunal Act, 2005 and Article 323-B of the Constitution are delinked from the disposed-of company-law appeals and will be listed separately for hearing.
Implications: The Court has not ruled on the merits of the constitutional challenges. The immediate effect is procedural—ensuring that the substantive issues concerning the NTT Act and Article 323-B will receive independent and focused adjudication. No new precedent on the validity of the NTT Act or Article 323-B has been set at this stage.
Order
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 authorised 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 (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. 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.
Alert