The creation of a National Company Law Tribunal may be further delayed, as a five-judge Constitution bench of the Supreme Court today held several provisions of the Company Law Amendment Act of 2002 as unconstitutional.
The unanimous judgment in an appeal moved by the central government asserted the independence of the judiciary and claimed an upper hand for a judicial member of the tribunal. At present, undue weightage is given to the tribunal's technical members, which dilutes the judicial supremacy in matters of adjudication, the apex court observed, adding that the judiciary has the power to review the decisions of the tribunal and this authority acts as "checks and balances" in this field of alternative dispute resolution.
However, the provisions of the amendment do not meet the constitutional requirement and, therefore, they need further amendment to make them valid, according to the apex court. It upheld the decision of the Madras High Court, which had held the law unconstitutional and suggested several modifications.
The present judgment of the Supreme Court adds further conditions to make the law valid. Only a judge of the rank of a high court judge can be a judicial member, it held, adding that a district judge who has held the post for five years, or a lawyer with 10 years at the bar, can also be a judicial member. The judicial members shall be appointed with the concurrence of the Chief Justice of India, according to the Supreme Court.
Further, a government official of the rank of secretary or additional secretary with special experience in the field of company law, industry and related fields can be a technical member. However, an official who has dealt with company law affairs cannot become a technical member. The salary and perks of the bureaucrat will not be the criteria for recruitment but his actual experience in the field. As the law stands, the provisions seem to be "tailor-made" for appointment of government officials, the judgment said.
A technical member with knowledge of accountancy or science relevant to the field of dispute also may be recruited for the tribunal, it said. According to the court, when there are three members in the panel, the judicial member will have the deciding vote. When there are more members, the majority decision will prevail.
NCLT, which was to take over the functions hitherto performed by the Board for Industrial and Financial Reconstruction, the Appellate Authority for Industrial and Financial Reconstruction and the Company Law Board, was proposed in the Companies (Second Amendment) Act. The Madras Bar Association challenged the law in the high court there. When the law was struck down, the central government moved Supreme Court.
The apex court bench headed by outgoing Chief Justice K G Balakrishnan delivered the judgment, which was written by Justice R V Raveendran for all the judges on the bench.