A Supreme Court five-judge constitution bench headed by Chief Justice of India (CJI) HL Dattu, and justices AK Sikri, Arun Mishra, Rohinton F Nariman and Amitava Roy declined to interfere with the setting up of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) on constitutional grounds, which are set to replace the existing Company Law Boards (CLBs) and the jurisdiction of other high courts.

The court allowed part of the writ petition brought by the Madras Bar Association, represented by senior counsel Arvind Datar, deciding that non-judicial members of the tribunals should at least be government additional secretaries.

it seems the only step which is left to make NCLT and NCLAT functional is to appoint President and Members of NCLT and Chairperson and Members of NCLAT

Since, the functioning of NCLT and NCLAT has not started so far and its high time that these Tribunals start functioning now, we hope that the respondents shall take remedial measures as per the directions contained in this judgment at the earliest, so that the NCLT & NCLAT are adequately manned and start functioning in near future.

A similar bench, presided over by then-CJI RM Lodha, had in September 2014 struck down the National Tax Tribunal as unconstitutional for having encroached on the judicial domain.

Differentiating that judgment, the bench has now held:

10. First of all the creation of Constitution of NCLAT has been specificallyupheld in 2010 judgment. It cannot be denied that this very petitionerhad specifically questioned the Constitutional validity of NCLAT in theearlier writ petition and even advanced the arguments on this very issue.This fact is specifically noted in the said judgment. The provisionpertaining to the constitution of the Appellate Tribunal i.e. Section 10FRof the Companies Act, 1956 was duly taken note of. Challenge was laidto the establishments of NCLT as well as NCLAT on the ground that theParliament had resorted to tribunalisation by taking away the powersfrom the normal courts which was essentially a judicial function and thismove of the Legislature impinged upon the impartiality, fairness andreasonableness of the decision making which was the hallmark ofjudiciary and essentially a judicial function. Argument went to the extentthat it amounted to negating the Rule of Law and trampling of theDoctrine of Separation of Powers which was the basic feature of theConstitution of India. What we are emphasising is that the petitionsspearheaded the attack on the constitutional validity of both NCLT aswell as NCLAT on these common grounds. The Court specifically wentinto the gamut of all those arguments raised and emphatically repelledthe same...

14. Frankly, Mr. Datar was conscious of the aforesaid limitation. He stillventured to attack the setting up of NCLAT on the ground that insofar asthis appellate forum is concerned, there are no reasons given in the saidjudgment and thereafter this aspect has been dealt with in more detailsin the NTT judgment wherein formation of National Tax Tribunal hasbeen held to be unconstitutional. This adventurism on the part of thepetitioner is totally unfounded. In the first instance, as mentioned above,insofar as NCLAT is concerned, its validity has already been upheld andthis issue cannot be reopened. Judgment in the case of 2010 judgmentis of a Constitution Bench and that judgment of a co-ordinate Benchbinds this Bench as well.

15. Secondly, reading of the Constitution Bench judgment in the matter ofNational Tax Tribunal would manifest that not only 2010 judgment wastaken note of but followed as well. The Court spelled out thedistinguishing features between NCLT/NCLAT on the one hand and NTTon the other hand in arriving at a different conclusion.

16. Thirdly, the NTT was a matter where power of judicial review hithertoexercised by the High Court in deciding the pure substantial question oflaw was sought to be taken away to be vested in NTT which was held tobe impermissible. In the instant case, there is no such situation. On thecontrary, NCLT is the first forum in the hierarchy of quasi-judicial fora setup in the Act, 2013. The NCLT, thus, would not only deal with questionof law in a given case coming before it but would be called upon tothrash out the factual disputes/aspects as well. In this scenario, NCLATwhich is the first appellate forum provided under the Act, 2013 toexamine the validity of the orders passed by NCLT, will have to revisitthe factual as well as legal issues. Therefore, situation is not akin toNTT Jurisdiction of the Appellate Tribunal is mentioned in Section 410itself which stipulates that NCLAT shall be constituted ‘for hearingappeals against the orders of the Tribunal’. This jurisdiction is notcircumscribed by any limitations of any nature whatsoever and theimplication thereof is that appeal would lie both on the questions of factsas well as questions of law. Likewise, under sub-section (4) of Section421, which provision deals with ‘appeal from orders of Tribunal’, it isprovided that the NCLAT, after giving reasonable opportunity of beingheard, ‘pass such orders thereon as it thinks fit, forming, modifying or setaside the order appealed against’. It is thereafter further appeal isprovided from the order of the NCLAT to the Supreme Court underSection 423 of the Act, 2013. Here, the scope of the appeal to theSupreme Court is restricted only ‘to question of law arising out of suchorder’.

17. Fourthly, it is not unknown rather a common feature/practice to provideone appellate forum wherever an enactment is a complete Code forproviding judicial remedies. Providing one right to appeal before anappellate forum is a well accepted norm which is perceived as a healthytradition.

18. For all these reasons, we hold that there is no merit in this issue...

29. We now deal with some other issues raised in the petition. It was feeblyargued by Mr. Datar that power to punish for contempt as given to theNCLT and NCLAT under Section 425 of the Act is not healthy and shouldbe done away with. It was also argued that power given to the CentralGovernment to constitute the Benches is again impermissible as suchpower should rest with President, NCLT or Chairman, NCLAT However,we hardly find any legal strength in these arguments. We have to keepin mind that these provisions are contained in a statute enacted by theParliament and the petitioner could not point out as to how suchprovisions are unconstitutional.

[Download judgment (PDF)]