Union of India vs. R. Gandhi and Ors.

Facts

The appeals filed by the President of Madras Bar Association (MBA) challenging the constitutional validity of Chapters 1B and 1C of the Companies Act, 1956 (Act) inserted by Companies (Second Amendment) Act 2002 (Amendment Act) providing for the constitution of National Company Law Tribunal (NCLT) and Appellate Tribunal-National Company Law Appellate Tribunal (NCLAT) respectively.

Key Takeaways for Students

Legal Issue

• Whether the Government can transfer the judicial functions traditionally performed by courts to Tribunals?
• Whether the constitution of NCLT and NCLAT under Parts 1B & 1C of the Act is valid?

Holding

Transfer of the judicial functions to the Tribunal: A legislature can enact a law transferring the jurisdiction exercised by courts regarding any specified subject to any tribunal, other than those which are vested in courts by express provisions of the Constitution. Any tribunal to which any existing jurisdiction of courts is transferred should also be a Judicial Tribunal. When any jurisdiction is shifted from courts to Tribunals, on the ground of pendency and delay in courts, and the jurisdiction so transferred does not involve any technical aspects requiring the assistance of experts, the Tribunals should normally have only judicial members. The Legislature can re-organize the jurisdictions of Judicial Tribunals. Thus, the Government can transfer the judicial functions traditionally performed by courts to Tribunals.

Constitution of NCLT and NCLAT: The creation of the NCLT and NCLAT and vesting in them, the powers and jurisdiction exercised by the High Court in regard to company law matters, are valid but Parts 1B and 1C of the Act as presently structured, are unconstitutional. After the constitution of Administrative Tribunals under the Administrative Tribunals Act, 1985 the jurisdiction regarding original jurisdiction relating to service matters was shifted from High Courts to Administrative Tribunals. However, Parts IB and IC of the Act may be operational by making suitable amendments regarding qualifications for members of NCLT and NCLAT respectively.

Final Decision Appeal Partly allowed

Ratio

Tribunals can be vested with the powers of the courts.