Here are some of the important conclusions reached by the Supreme Court in the CCI v. SAIL &Anr.(civil appeal no. 7779 of 2010):
“In terms of Section 53A(1)(a) of the Act appeal shall lie only against such directions, decisions or orders passed by the Commission before the Tribunal which have been specifically stated under the provisions of Section 53A(1)(a). The orders, which have not been specifically made appealable, cannot be treated appealable by implication. For example taking a prima facie view and issuing a direction to the Director General for investigation would not be an order appealable under Section 53A (emphasis mine).”
“Neither any statutory duty is cast on the Commission to issue notice or grant hearing, nor any party can claim, as a matter of right, notice and/or hearing at the stage of formation of opinion by the Commission, in terms of Section 26(1) of the Act that a prima facie case exists for issuance of a direction to the Director General to cause an investigation to be made into the matter.”(emphasis mine)
“The Commission, in cases where the inquiry has been initiated by the Commission suo moto, shall be a necessary party and in all other cases the Commission shall be a proper party in the proceedings before the Competition Tribunal. The presence of the Commission before the Tribunal would help in complete adjudication and effective and expeditious disposal of matters. Being an expert body, its views would be of appropriate assistance to the Tribunal. Thus, the Commission in the proceedings before the Tribunal would be a necessary or a proper party, as the case may be.” (emphasis mine)
“During an inquiry and where the Commission is satisfied that the act is in contravention of the provisions stated in Section 33 of the Act, it may issue an order temporarily restraining the party from carrying on such act, until the conclusion of such inquiry or until further orders without giving notice to such party, where it deems it necessary. This power has to be exercised by the Commission sparingly and under compelling and exceptional circumstances. The Commission, while recording a reasoned order inter alia should : (a) record its satisfaction (which has to be of much higher degree than formation of a prima facie view under Section 26(1) of the Act) in clear terms that an act in contravention of the stated provisions has been committed and continues to be committed or is about to be committed; (b) It is necessary to issue order of restraint and (c) from the record before the Commission, it is apparent that there is every likelihood of the party to the lis, suffering irreparable and irretrievable damage or there is definite apprehension that it would have adverse effect on competition in the market.” (emphasis mine)
“In consonance with the settled principles of administrative jurisprudence, the Commission is expected to record at least some reason even while forming a prima facie view. However, while passing directions and orders dealing with the rights of the parties in its adjudicatory and determinative capacity, it is required of the Commission to pass speaking orders, upon due application of mind, responding to all the contentions raised before it by the rival parties.” (emphasis mine)
At first blush the finding of the Supreme Court seems to be correct. However I shall analyze the decision in greater detail in a subsequent post.
Showing posts with label Administrative Law. Show all posts
Showing posts with label Administrative Law. Show all posts
Saturday, September 11, 2010
Wednesday, May 12, 2010
Constitutional Validity of the NCLT: A Brief Background
The business standard and livemint both report that the Supreme Court has upheld the constitutional validity of the National Company Law Tribunal (‘NCLT’). The judgement of the Supreme Court is not yet available. In the meantime though, it is worth recapitulating the contours of this dispute.
The legislature through the Companies (second amendment) Act, 2002 had made provisions for setting up the NCLT and the National Company Law Appellate Tribunal. The NCLT was conferred the power to hear all the matters relating to amalgamation, reconstruction of companies, winding up, reduction of share capital and other related matters. Previously these powers were conferred on the High Courts. Though the amendment to set up the NCLT was made in 2002, it has not been able to see the light of day. This reason being a pending appeal before the Supreme Court of India. The appeal was preferred by the Union of India against the judgement of the Madras High Court in R. Gandhi v. Union of India. In Gandhi the Madras High Court had held that setting up of the NCLT was Unconstitutional.
The fundamental challenge to the constitutionality of the NCLT revolves around the point, whether a complete transfer of matters from the jurisdiction of the High Court to a quasi judicial body would in principle be against the indispensable constitutional principles of independence of the judiciary and separation of powers. In the Gandhi case the madras high court had answered the question in the affirmative. Essentially two simple question needs determination insofar as the constitutionality of the NCLT is concerned:
1. Whether in principle setting up of the NCLT and excluding the jurisdiction of the High Court is constitutional?
2. Whether in its present form, the provisions relating to the appointment, tenure, qualification etc. of members of the NCLT is such that it keeps the basic constitutional principles of independence of judiciary and separation of power intact?
The first question seems to be squarely covered by the Supreme Court judgement in the L. Chandrakumar case. In the Chandrakumar case a seven judge bench of the Supreme Court had held that the power of judicial review of the high court under art. 226 cannot be excluded by the legislature through a constitutional amendment; as such a power conferred on the high court constitutes the basic structure of the constitution. In essence, the Supreme Court stated that a specialized tribunal can be set up as long as that tribunal performs a supplementary role as opposed to a substitutive role to the High courts. Simply put, if the power of judicial review is kept intact then there is no constitutional issue in setting up a specialized tribunal. On this point it seems the setting of the NCLT is clear of any constitutional hurdles or the ratio of Chandrakumar. The following paragraph from the Gandhi judgement clarifies the point:
“Parliament is thus competent to enact law with regard to the incorporation, regulation and winding up of Companies. The power of regulation would include the power to set up an adjudicatory machinery for resolving the matters litigated upon, and which concern the working of the companies in all their facets. The Law Commission, as noted by the Supreme Court in the case of Chandra Kumar, had also recommended the creation of specialist Tribunals in places of generalist Courts. Creation of National Company Law Tribunals and Appellate Tribunals and vesting in those Tribunals the powers exercised by the High Court with regard to company matters cannot be said to be unconstitutional.”- Para 57
Needless to say, the second point is the critical issue as far the constitutional validity of the NCLT is concerned. In the Gandhi case the Madras High Court after the perusal of several provisions relating to the appointment, tenure, qualification etc of the members of the NCLT. had come to this conclusion:
“In the light of foregoing discussions it is declared that until the provisions in parts 1B and 1C of the Companies Act introduced by the Companies (Amendment) Act, 2002, which have been found to be defective in as much as they are in breach of the basic constitutional scheme of separation of powers and independence of the judicial function, are duly amended, by removing the defects that have been pointed out, it would be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now excercised by the High courts or the Company Law Board.” Para 123
In light of this background what one can hope from the Supreme Court Judgement is guidelines relating to the appointment, tenure etc. of the members of the NCLT so as to make it constitutionally viable.
The legislature through the Companies (second amendment) Act, 2002 had made provisions for setting up the NCLT and the National Company Law Appellate Tribunal. The NCLT was conferred the power to hear all the matters relating to amalgamation, reconstruction of companies, winding up, reduction of share capital and other related matters. Previously these powers were conferred on the High Courts. Though the amendment to set up the NCLT was made in 2002, it has not been able to see the light of day. This reason being a pending appeal before the Supreme Court of India. The appeal was preferred by the Union of India against the judgement of the Madras High Court in R. Gandhi v. Union of India. In Gandhi the Madras High Court had held that setting up of the NCLT was Unconstitutional.
The fundamental challenge to the constitutionality of the NCLT revolves around the point, whether a complete transfer of matters from the jurisdiction of the High Court to a quasi judicial body would in principle be against the indispensable constitutional principles of independence of the judiciary and separation of powers. In the Gandhi case the madras high court had answered the question in the affirmative. Essentially two simple question needs determination insofar as the constitutionality of the NCLT is concerned:
1. Whether in principle setting up of the NCLT and excluding the jurisdiction of the High Court is constitutional?
2. Whether in its present form, the provisions relating to the appointment, tenure, qualification etc. of members of the NCLT is such that it keeps the basic constitutional principles of independence of judiciary and separation of power intact?
The first question seems to be squarely covered by the Supreme Court judgement in the L. Chandrakumar case. In the Chandrakumar case a seven judge bench of the Supreme Court had held that the power of judicial review of the high court under art. 226 cannot be excluded by the legislature through a constitutional amendment; as such a power conferred on the high court constitutes the basic structure of the constitution. In essence, the Supreme Court stated that a specialized tribunal can be set up as long as that tribunal performs a supplementary role as opposed to a substitutive role to the High courts. Simply put, if the power of judicial review is kept intact then there is no constitutional issue in setting up a specialized tribunal. On this point it seems the setting of the NCLT is clear of any constitutional hurdles or the ratio of Chandrakumar. The following paragraph from the Gandhi judgement clarifies the point:
“Parliament is thus competent to enact law with regard to the incorporation, regulation and winding up of Companies. The power of regulation would include the power to set up an adjudicatory machinery for resolving the matters litigated upon, and which concern the working of the companies in all their facets. The Law Commission, as noted by the Supreme Court in the case of Chandra Kumar, had also recommended the creation of specialist Tribunals in places of generalist Courts. Creation of National Company Law Tribunals and Appellate Tribunals and vesting in those Tribunals the powers exercised by the High Court with regard to company matters cannot be said to be unconstitutional.”- Para 57
Needless to say, the second point is the critical issue as far the constitutional validity of the NCLT is concerned. In the Gandhi case the Madras High Court after the perusal of several provisions relating to the appointment, tenure, qualification etc of the members of the NCLT. had come to this conclusion:
“In the light of foregoing discussions it is declared that until the provisions in parts 1B and 1C of the Companies Act introduced by the Companies (Amendment) Act, 2002, which have been found to be defective in as much as they are in breach of the basic constitutional scheme of separation of powers and independence of the judicial function, are duly amended, by removing the defects that have been pointed out, it would be unconstitutional to constitute a Tribunal and Appellate Tribunal to exercise the jurisdiction now excercised by the High courts or the Company Law Board.” Para 123
In light of this background what one can hope from the Supreme Court Judgement is guidelines relating to the appointment, tenure etc. of the members of the NCLT so as to make it constitutionally viable.
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