Judges: Ranjan Gogoi, C.J.I., N.V. Ramana, Dr. D.Y. Chandrachud, Deepak Gupta and Sanjiv Khanna, JJ.

Facts:

A five-judge constitutional bench of the Supreme Court decided the challenge made to the constitutional validity of Part XIV of the Finance Act, 2017 and of the rules framed in consonance of Section 184 of the Finance Act.

Part XIV of the Finance Act, 2017, by which the provisions of twenty-five different enactments were amended, empowered the Union Government to administer all the Tribunals, specifically with regard to the conditions of service, mode of appointment, security of tenure and requisite qualifications of its members and presiding officers.

Issues:

(i) 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?

(ii) 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?

(iii) 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?

(iv) Whether there should be a Single Nodal Agency for administration of all Tribunals?

(v) Whether there is a need for conducting a Judicial Impact Assessment of all Tribunals in India?

(vi) 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?

(vii) Whether direct statutory appeals from Tribunals to the Supreme Court ought to be detoured?

(viii) Whether there is a need for amalgamation of existing Tribunals and setting up of benches?

Law:

Constitution of India, 1950 - Article 110 - What shall constitute a 'money bill'.

Finance Act, 2017 - Section 184 - Empowers Central Government to make Rules to provide for qualifications; appointment; term of office; salaries and allowances; resignation; removal and other terms and conditions of service for Chairman and other members of Tribunal, Appellate Tribunal.

Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 - Rules formulated by the Central Government under Section 184 of the Finance Act, 2017 regulating qualification, appointment, removal and other service conditions for Chairman and other members of Tribunal, Appellate Tribunal.

Contentions:

Petitioners

(i) Part XIV read with the 8th and 9th Schedules of the Finance Act 2017, is ex-facie unconstitutional, arbitrary, in colourable exercise of legislative power, and offensive to the basic structure of the Constitution.

(ii) Part-XIV could not and ought not to have been made part of the Finance Act, 2017 as the said part is not classifiable as a 'money bill'.

(iii) Tribunals are governed by Article 323-A and 323-B of the Constitution and laws enacted in this regard cannot be classified as money bills. Further, Parliament in making changes to Tribunals can trace its competence to Entry 11-A of List III of the Constitution which deals with administration of justice, and not financial matters.

(iv) Part XIV is also bad in law for its effect of terminating the services of presiding officers and members of various now-defunct Tribunals, which is a direct interference in the independence of the judiciary.

(v) Section 184(1) of the Finance Act, 2017, in so far as it empowers the Central Government to make Rules to provide for qualifications and procedure of appointment, conditions of service, terms and salaries suffers from the vice of excessive delegation.

(vi) Various deficiencies and contradictions in the administration of Tribunals and certain anomalous situations like providing direct appeals to this Court are against the spirit of the Constitution.

(vii) There should be a mandamus directing the State to mandatorily conduct 'Judicial Impact Assessment' of legislations.

Respondent

(i) There are inconsistencies in conditions of service, modes of appointment, tenures etc. of members and presiding officers in different Tribunals. Such inconsistencies are drafting errors and hence there was need to streamline and harmonise the applicable rules, which is what was attempted through the Finance Act, 2017.

(ii) Inherent contradiction in according status and rank equivalent to that of Constitutional Court judges to members and presiding officers of such Tribunals and regulatory bodies. To address multiple problems arising in the administration of justice as a result of such practice, there is need to keep 'rank' and 'status' separate from 'salary' and 'allowances'.

(iii) Introducing separate amendments on uniformity of service conditions in various tribunals would have been unwieldy and impractical, besides resulting in several inconsistencies. Resultantly, a holistic view was taken and a single enactment was sought to be introduced in order to harmoniously bring uniformity.

(iv) Terms of the Constitution, including Clauses (a) to (g) of Article 110(1), must be interpreted in their widest amplitude, with the result that when the principal enactment had the dominant character of a 'money bill', all matters incidental thereto and inserted therein would also draw the colour and characteristic of a 'money bill'.

(v) Speaker of the Lok Sabha was the final and only Constitutional authority to adjudge the nature of a bill sought to be introduced Under Article 109. Such decision was both final and hence not subject to any judicial review by any Court.

Analysis:

Finance Act, 2017 - Whether can be termed as a 'money bill' under Article 110 of Constitution

(i) Use of the word 'only' in Article 110(1) of Constitution has its purpose, which is clear restriction for a bill to be certified as a "Money Bill". Legislative intent was that the main and substantive provision of an enactment should only be any or all of the Sub-clauses from (a) to (f) of Article 110(1) of Constitution. In the event the main or substantive provisions of the Act are not covered by Sub-clauses (a) to (f), the bill cannot be said to be a "Money Bill". Money Bill must deal with the declaration of any expenditure to be charged on the Consolidated Fund of India.

(ii) Provisions of Part XIV can be broken down into three broad categories. First, abolition and merger of existing Tribunals. Second, uniformizing and delegating to the Central Government through the Rules the power to lay down qualifications; method of appointment and removal, and terms and conditions of service of Presiding Officers and members. Third, termination of services and payment of compensation to presiding officers and members of certain tribunals that have now become de-funct.

Need for reference of dispute to a large bench

(i) Majority in K.S. Puttaswamy (MANU/SC/1054/2018) pronounced the nature of the Aadhaar Act without first delineating the scope of Article 110(1) and principles for interpretation or the repercussions of such process.

(ii) Majority dictum in 'K.S. Puttaswamy' did not substantially discuss the effect of the word 'only' in Article 110(1) and offers little guidance on the repercussions of a finding when some of the provisions of an enactment passed as a "Money Bill" do not conform to Article 110(1)(a) to (g) of Constitution.

(iii) Analysis in 'K.S. Puttaswamy' makes its application difficult to the present case and raises a potential conflict between the judgments of coordinate Benches.

(iv) Being a Bench of equal strength as that in 'K.S. Puttaswamy', it was felt evitable to direct this batch of matters to be placed before Hon'ble the Chief Justice of India, on the administrative side, for consideration by a larger Bench.

Section 184 of the Finance Act, 2017 - Whether unconstitutional on account of Excessive Delegation

(i) Section 184 has conferred upon the Central Government power to make Rules to provide for qualifications; appointment; term of office; salaries and allowances; resignation; removal and other terms and conditions of service of the Chairperson and other Members of the Tribunal, Appellate Tribunal.

(ii) Power to prescribe such qualifications, selection procedure and service conditions of members and other office holders of the tribunals is not intended to vest solely with the Legislature for all times and purposes. Policy and guidelines exist.

(iii) A mere possibility or eventuality of abuse of delegated powers in the absence of any evidence supporting such claim, cannot be a ground for striking down the provisions of the Finance Act, 2017.

(iv) It is always open to a Constitutional court on challenge made to the delegated legislation framed by the Executive to examine whether it conforms to the parent legislation and other laws, and apply the "policy and guideline" test. If found contrary, it can be struck down without affecting the constitutionality of the Rule making power conferred under Section 186 of the Finance Act, 2017.

Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 - Whether constitutional

Composition of a Search-cum-Selection Committee - Contravention of separation of powers and encroachment on the judicial domain

(i) Composition of a Search-cum-Selection Committee is contemplated in a manner whereby appointments of Member, Vice-President and President are predominantly made by nominees of the Central Government.

(ii) A perusal of the Schedule to the Rules shows that save for token representation of the Chief Justice of India or his nominee in some Committees, the role of the judiciary is virtually absent.

(i) Lack of judicial dominance in the Search-cum-Selection Committee is in direct contravention of the doctrine of separation of powers and is an encroachment on the judicial domain.

(iii) Composition of the Search-cum-Selection Committees under the Rules amounts to excessive interference of the Executive in appointment of members and presiding officers of statutory Tribunals. Same would undoubtedly be detrimental to the independence of judiciary besides being an affront to the doctrine of separation of powers.

(iv) It is important that judicial appointments take place without any influence or control of any other limb of the sovereign. Independence of judiciary is the only means to maintain a system of checks and balances on the working of Legislature and the Executive. The Executive is a litigating party in most of the litigation and hence cannot be allowed to be a dominant participant in judicial appointments.

Rules relating to qualifications of members and presiding officers

(i) While prescribing the qualifications of technical member, the prior judicial dicta have been ignored by the Central Government inasmuch as the technical members are being appointed without any adjudicatory experience.

(ii) There has been a blatant dilution of judicial character in appointments whereby candidates without any judicial experience are prescribed to be eligible for adjudicatory posts such as that of the Presiding Officer.

(iii) Adjudication of disputes which was originally vested in Judges of Courts, if done by technical or non-judicial member, is clearly a dilution and encroachment on judicial domain. Parliament cannot divest judicial functions upon technical members, devoid of the either adjudicatory experience or legal knowledge.

(iv) Power/discretion vested to specify qualifications and decide who should man the Tribunals has to be exercised keeping in view the larger public interest and the same must be just, fair and reasonable and not vague or imprecise.

(v) Anomalous situations created by allowing High Court judges to be appointed to a position occupied earlier by a Supreme Court judge, affects the prestige of the Judiciary as an institution.

Constitutionality of procedure of removal

(i) Under the present Rules it is permissible for the Central Government to appoint an enquiry committee for removal of any presiding officer or member on its own. The Rules are not explicit on who would be part of such a Committee and what would be the role of the Judiciary in the process. In doing so, it significantly weakens the independence of the Tribunal members.

(ii) Members and Presiding Officers of Tribunals cannot be removed without either the concurrence of the Judiciary or in the manner specified in the Constitution for Constitutional Court judges.

Rules relating to Term of Office and Maximum Age

(i) Constitution of India doesn't differentiate between High Courts in terms of conditions of service of judges and prescribes a uniform age of superannuation for judges of all High Courts. Conforming to the principle, the Tribunals should have similar standards of appointment and service as that of the Court it is substituting. There must, therefore, be a uniform age of superannuation for all members in all the Tribunals.

(ii) The tenure of Members of Tribunals as prescribed under the Schedule of the Rules is anti-merit and attempts to create equality between unequals. A tenure of three years may be suitable for a retired Judge of High Court or the Supreme Court or even in case of a judicial officer on deputation. However, it will be illusory to expect a practising advocate to forego his well-established practice to serve as a Member of a Tribunal for a period of three years.

(iii) The legislature intended to incorporate uniformity in the administration of Tribunal by virtue of Section 184 of Finance Act, 2017. Nevertheless, such uniformity cannot be attained at the cost of discouraging meritorious candidates from being appointed as Members of Tribunals.

Contradictions in the Rules

(i) Various inconsistencies within the Rules with regard to the tenure prescribed for the Members of Tribunals insofar as a fixed tenure of three years for both direct appointments from the Bar and appointment of retired judicial officers or judges of High Court or Supreme Court. It is also discriminatory to the extent that it attempts to create equality between unequal classes.

(ii) Difference in the age of superannuation of the Members, Vice-Chairmen and Chairmen, as formulated in the Rules is contrary to the objectives of the Finance Act, 2017 viz., to attain uniformity in the composition of the Tribunal framework.

(iii) Rule 4(2) of the Rules providing that the Secretary to the Government of India in the Ministry or Department under which the Tribunal is constituted shall be the convener of the Search-cum-Selection Committee. Same is in direct violation of the doctrine of Separation of Powers and thus contravenes the basic structure of the Constitution.

(iv) Rule 7 accords unwarranted discretion to the Central Government insofar as it merely directs and not mandates the Central Government to consider the recommendation of Committee for removal of a Member of a Tribunal.

(v) Rule 7(b) cannot be allowed to survive as it allows the Executive to interpret the meaning of 'moral turpitude', which is an encroachment on the judicial domain.

(vi) Central Government cannot be allowed to have administrative control over the Judiciary without subverting the doctrine of separation of powers.

Administration of all Tribunals - Whether can be done by a Single Nodal Agency

(i) Tribunals established under different Central and State enactments are usually administered by their sponsoring or parent Ministry or concerned department. Thus, when Tribunals or members thereof have to seek financial, administrative or any other facility from a department who is also the litigant before them, their fairness or independence is likely to be compromised.

(ii) Such an anomalous situation can only be remedied by the establishment of a single nodal agency, overseeing the entire Tribunal system in the country, bringing all such Tribunals to parity.

(iii) It may not be very crucial as to which Ministry or Department performs the duties of Nodal Agency for a Tribunal. What is of utmost importance is that the Tribunal should not be expected to look towards such Nodal Agency for its day to day requirements. There must be a direction to allocate adequate and sufficient funds for each Tribunal to make it self-sufficient and self-sustainable authority for all intents and purposes.

(iv) The expenditure to be incurred on the functioning of each Tribunal has to be necessarily a charge on the Consolidated Fund of India.

(v) Therefore, hitherto, the Ministry of Finance shall, in consultation with the Nodal Ministry/Department, shall earmark separate and dedicated funds for the Tribunals.

Functioning of Tribunals - Whether there is a need for conducting a Judicial Impact Assessment

(i) Legislature has not conformed to the opinion of this Court with respect to 'Judicial Impact Assessment' and thus, has not made any attempt to assess the ramifications of the Finance Act, 2017.

(ii) It can be legitimately expected that the multifarious amendments in relation to merger and reorganisation of Tribunals may result in massive increase in litigation which, in absence of adequate infrastructure, or budgetary grants, will overburden the Judiciary.

(iii) Union of India should carry out financial impact assessment in respect of all the Tribunals referable to Sections 158 to 182 of the Finance Act, 2017 and undertake an exercise to assess the need based requirements and make available sufficient resources for each Tribunal established by the Parliament.

Judges of Tribunals established under Articles 323-A and 323-B of the Constitution - Whether can be equated in 'rank' and 'status' with Constitutional functionaries

(i) Union has, in addition to equal pay and perks, accorded status equivalent to that of Supreme Court and High Court judges to Chairmen/Presidents of various Tribunals and authorities.

(ii) Executive action cannot confer status equivalent to that of either Supreme Court or High Court judges on any member or head of any Tribunal or other judicial fora.

(iii) Even though manned by retired judges of High Courts and the Supreme Court, such Tribunals established Under Article 323-A and 323-B of the Constitution cannot seek equivalence with High Courts or the Supreme Court.

(iv) Once a judge of a High Court or Supreme Court has retired and he/she no longer enjoys the Constitutional status, the statutory position occupied by him/her cannot be equated with the previous position as a High Court or a Supreme Court judge.

(v) The rank, dignity and position of Constitutional judges is hence sui generis and arise not merely by their position in the Warrant of Precedence or the salary and perquisites they draw, but as a result of the Constitutional trust accorded in them.

(vi) Indiscriminate accordance of status of such Constitutional judges on Tribunal members and presiding officers will do violence to the very Constitutional Scheme.

Direct statutory appeals from Tribunals to the Supreme Court - Whether in consonance with the three-tier judicial system as established under Constitution

(i) Such statutory appeals take away the inherent ability of the Supreme Court, as envisaged in the Constitution, to regulate cases before it by confining its consideration to cases involving the most egregious of wrongs and/or having the greatest impact on public interest.

(ii) In providing for appeals directly from Tribunals, the jurisdiction of High Courts is in effect curtailed to a great extent. Since majority of the judges of the Supreme Court are elevated from the High Courts, their lack of exposure to these specialised areas of law hinders their efficacy in adjudicating the direct statutory appeals from specialised Tribunals.

(iii) With increasing tribunalisation, statutory appeal provisions are ostensibly being included without undertaking any 'Judicial Impact Assessment'.

(iv) Provisions for statutory appeals directly and liberally to the Supreme Court raises the inevitability of bogging the Court down and inhibiting its Constitutional objective.

(v) Further, providing statutory appeals to Supreme Court against orders of Tribunals also undermines the essence of tribunalisation. It is hardly rational to state on one hand that an alternate to the ordinary method of justice dispensation needs to be provided owing to the complicated procedures and owing to the lack of specialisation of District and High Courts, and in the same breadth also provide statutory appeals to the final Court in that very original system.

(vi) Union of India, should in consultation with either the Law Commission or any other expert body, revisit such provisions under various enactments providing for direct appeals to the Supreme Court against orders of Tribunals, and instead provide appeals to Division Benches of High Courts, if at all necessary.

Need for amalgamation of existing tribunals and setting up of benches

(i) It is the prerogative of the Legislature to set up alternate avenues for dispute resolution to supplement the functioning of existing Courts, but it is essential that such mechanisms are equally effective, competent and accessible.

(ii) Given that jurisdiction of High Courts and District Courts is affected by the constitution of Tribunals, it is necessary that benches of the Tribunals be established across the country.

(iii) However, owing to the small number of cases, many of these Tribunals do not have the critical mass of cases required for setting up of multiple benches. On the other hand, it is evident that other Tribunals are pressed for resources and personnel.

(iv) It is essential that after conducting a Judicial Impact Assessment as directed earlier, such 'niche' Tribunals be amalgamated with others dealing with similar areas of law, to ensure effective utilisation of resources and to facilitate access to justice.

Conclusions:

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

(ii) Section 184 of the Finance Act, 2017 does not suffer from excessive delegation of legislative functions as there are adequate principles to guide framing of delegated legislation, which would include the binding dictums of this Court.

(iii) The Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 suffer from various infirmities as observed earlier. These Rules formulated by the Central Government Under Section 184 of the Finance Act, 2017 being contrary to the parent enactment and the principles envisaged in the Constitution as interpreted by this Court, are hereby struck down in entirety.

(iv) The Central Government is accordingly directed to re-formulate the Rules strictly in conformity and in accordance with the principles delineated by this Court in R.K. Jain (supra), L. Chandra Kumar (supra), Madras Bar Association (supra) and Gujarat Urja Vikas Ltd. (supra) conjointly read with the observations made in the earlier part of this decision.

(v) The new set of Rules to be formulated by the Central Government shall ensure non-discriminatory and uniform conditions of service, including assured tenure, keeping in mind the fact that the Chairperson and Members appointed after retirement and those who are appointed from the Bar or from other specialised professions/services, constitute two separate and distinct homogeneous classes.

(vi) It would be open to the Central Government to provide in the new set of Rules that the Presiding Officers or Members of the Statutory Tribunals shall not hold 'rank' and 'status' equivalent to that of the Judges of the Supreme Court or High Courts, as the case may be, only on the basis of drawing equal salary or other perquisites.

(vii) There is a need-based requirement to conduct 'Judicial Impact Assessment' of all the Tribunals referable to the Finance Act, 2017 so as to analyse the ramifications of the changes in the framework of Tribunals as provided under the Finance Act, 2017. Thus, we find it appropriate to issue a writ of mandamus to the Ministry of Law and Justice to carry out such 'Judicial Impact Assessment' and submit the result of the findings before the competent legislative authority.

(viii) The Central Government in consultation with the Law Commission of India or any other expert body shall re-visit the provisions of the statutes referable to the Finance Act, 2017 or other Acts as listed in para 174 of this order and place appropriate proposals before the Parliament for consideration of the need to remove direct appeals to the Supreme Court from orders of Tribunals. A decision in this regard by the Union of India shall be taken within six months.

(ix) The Union Government shall carry out an appropriate exercise for amalgamation of existing Tribunals adopting the test of homogeneity of the subject matters to be dealt with and thereafter constitute adequate number of Benches commensurate with the existing and anticipated volume of work.

Important Precedents:

(i) Justice K.S. Puttaswamy and Ors. v. Union of India

(ii) L. Chandra Kumar v. Union of India, MANU/SC/0261/1997

(iii) Madras Bar Association v. Union of India, MANU/SC/0610/2015