14 Jul 2121

It is settled law that judicial review of an ordinance should be akin to that of legislative action - Supreme Court of India

Case : Madras Bar Association v. Union of India and Anr. Writ Petition (Civil) No. 502 of 2021

Court : Supreme Court of India

Bench : Justice L. Nageswara Rao, Justice Hemant Gupta and Justice S. Ravindra Bhat

Decided on : 14 Jul 2121

Relevant Statues

Articles 14, 21, 50 of the Constitution of India, 1950

Sections 12, 13 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021

Sections 184, 186(2) of the Finance Act, 2017

Brief Facts & Procedure History

1. The relevant seminal facts state that the Madras Bar Association has filed this Writ Petition seeking a declaration that Sections 12 and 13 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 and Sections 184 and 186 (2) of the Finance Act, 2017 as amended by the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 as ultra vires Articles 14, 21 and 50 of the Constitution of India, 1950.

2. These are violative of the principles of separation of powers and independence of the judiciary, apart from being contrary to the principles laid down by this Court in Union of India v. R. Gandhi, President, Madras Bar Association, (2010) 11 SCC 1; Madras Bar Association v. Union of India & Anr., (2014) 10 SCC 1; Rojer Mathew v. South Indian Bank Limited & Ors., (2020) 6 SCC 1 and Madras Bar Association v. Union of India & Anr., (2020) SCC Online SC 962. The Petitioner seeks a further direction to Respondent No.2 for the establishment of a separate wing to cater to the requirements of tribunals in India.

The Issue(s) of the Case

Whether Sections 12 and 13 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 and Sections 184 and 186 (2) of the Finance Act, 2017 as amended by the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 are ultra vires to the Articles 14, 21 and 50 of the Constitution of India, 1950?

The Observations of the Court

The Honourable Supreme Court observed the following:

As per Justice L. Nageswara Rao,

1. Opined that with respect to the Separation of Powers, the judicial pronouncements and the literature embodies the separation of powers as a part of the basic structure of the Constitution and the violation of the separation of powers would result in infringement of Article 14 of the Constitution.

2. Further opined that with respect to the Independence of the Judiciary, Article 50 of the Constitution of India, 1950 provides that the State shall take steps to separate the judiciary from the executive in the public services of the State. Moreover, an independent and efficient judicial system has been recognised as a part of the basic structure of our Constitution.

3. With respect to judicial decisions and legislative overruling, reference has been made to the reaction of courts to the legislative override in comparative jurisdictions by referring to several precedents such as Marbury v. Madison, 5 U.S. 137 (1803); United States v. Peters, 9 U.S. 115 (1809); Brown v. Board of Education of Topeka, 347 U.S. 483 (1954); Etc.

4. With respect to the scope of judicial review in India, the Court critically analysed Article 123 of the Constitution of India, 1950 and opined that the judicial review of an ordinance should be akin to that of legislative action. With respect to permissible legislative overruling, reliance was placed upon several precedents such as Shri Prithvi Cotton Mills Ltd. & Anr. v. Broach Borough Municipality & Ors. (1969) 2 SCC 283; Patel Gordhandas Hargovindas & Ors. v. Municipal Commissioner, Ahmedabad & Anr, (1964) 2 SCR 608; State of Tamil Nadu v. State of Kerala & Anr, (2014) 12 SCC 696; Etc.

5. With respect to the validity of the impugned ordinance, the Court critically analysed Section 184 of the Finance Act, 2017 and noted that the first proviso of Section 184(1) of the Finance Act, 2017 provides a minimum age for appointment as Chairperson or Member as 50 years.

6. Opined that fixing a minimum age for recruitment of Members as 50 years would act as a deterrent for competent advocates to seek appointment. Further opined that the first proviso to Section 184 (1) of the Finance Act, 2017 is unconstitutional as it is violative of Article 14 of the Constitution, 1950.

7. Took cognizance of the second proviso to Section 184(1) of the Finance Act, 2017 where it deals with the allowances and benefits payable to the Members which are to be the same as are admissible to a Central Government officer holding a post carrying the same pay.

8. Noted that a notification was issued by the Ministry of Finance (Department of Revenue) on 30.06.21 amending the 2020 Rules. By Rule 6 of the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) (Amendment) Rules, 2021.

9. Opined that the 2020 Rules were held to be prospective in Madras Bar Association v. Union of India & Anr. (MBA-III), (2020) SCC online SC 962 on two grounds - a) it was clear from the Notification dated 12.02.2020 that there was no intention on the part of the Government of India to make the 2020 Rules retrospective; b) subordinate legislation cannot be given prospective effect unless the parent statute specifically provided the same.

10. Contemplated the second part of Section 184(7) of the Finance Act, 2017 which provides that the Government shall take a decision regarding the recommendations made by the Search-cum-Selection Committee preferably within a period of three months and opined that the said section is unconstitutional, as this amended provision simply seeks to negate the directions of the Court.

11. Opined that insertion of Section 184(11) of the Finance Act, 2017 prescribing a term of four years for the Chairpersons and Members of tribunals by giving retrospective effect to the provision from 26.05.2017 is clearly an attempt to override the declaration of law by this Court under Article 141 of the Constitution of India, 1950 in Madras Bar Association v. Union of India & Anr. (MBA-III), (2020) SCC online SC 962. Therefore, clauses (i) and (ii) of Section 184(11) of the Finance Act, 2017 are considered to be void and unconstitutional.

As per Justice Hemant Gupta,

12. Opined that the Parliament and Legislative Assemblies exercise sovereign power to enact law and no outside power or authority can issue a direction to enact a particular kind of legislation by referring to several precedents such as Kalpana Mehta & Ors. v. Union of India & Ors., (2018) 7 SCC 1 (Para 42); Cauvery Water Disputes Tribunal, 1993 Supp (1) SCC 96 (2); Medical Council of India, (2019) 13 SCC 185;Etc.

13. With respect to the legality and validity of the first proviso to Section 184(1) of the Finance Act, 2017, disagreed to the opinion that the first proviso to Section 184 of the Finance Act, 2017 prescribing a minimum age of fifty years is an attempt to circumvent the direction issued in Madras Bar Association v. Union of India & Anr. (MBA-III), (2020) SCC online SC 962.

14. Opined that the fixation of fifty years of age as the eligibility condition cannot be said to be manifestly arbitrary or violative of any of the Fundamental Rights of any of the candidates which may render such condition of age as illegal. Further opined that in case of failing to secure reappointment, the candidate will not be able to resume practice is based upon apprehensions.

15. With respect to Legality and validity of the Second & Third proviso to Section 184(1) of the Finance Act, 2017, critically analysed the second and the third proviso of Section 184(1) of the Finance Act, 2017 and opined in terms of the third proviso, the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) (Amendment) Rules, 2021 have been published.

16. With respect to Section 184(7) of the Finance Act, 2017, relied on cases such as S.S. Bola & Ors. v. B.D. Sardana & Ors., (1997) 8 SCC 522; B.K. Pavitra v. Union of India, (2019) 16 SCC 129;Etc.

As per Justice S. Ravindra Bhat,

17. Disagreed with the concurring opinion of Justices L. Nageswara Rao and Hemant Gupta and referred to several precedents such as Dr. D.C. Wadhwa & Ors v. State of Bihar & Ors, 1987 (1) SCR 198; Krishna Kumar Singh v. State of Bihar, (2017) 3 SCC 1; L. Chandra Kumar v Union of India, 1997 (3) SCC 261; Etc.

18. Opined that Section 184 of the Finance Act, 2017 has the effect of excluding deserving candidates, without subserving any discernible public policy or goal. Hence, the classification is based on no justifiable rationale nor it is neither shown to have a rational nexus with the object sought to be achieved. Reliance was placed upon the cases of Anuj Garg v. Hotel Assn. of India, (2008) 3 SCC 1; Smith v. City of Jackson, 544 US 228 (2005); Etc.

19. Concurred with the reasoning and conclusions of Justice L. Nageswara Rao about the impermissibility of legislative override, even while upholding the retrospectively according to Section 184 (11) of the Finance Act, 2017.

The Decision Held by the Court

As per Justice L. Nageswara Rao,

1. Declared the first and the second proviso, read with the third proviso, of Section 184 of the Finance Act, 2017 overrides the judgment of this Court in Madras Bar Association v. Union of India & Anr. (MBA-III), (2020) SCC online SC 962,  in respect of fixing 50 years as the minimum age for appointment and payment of HRA.

2. Section 184(7) of the Finance Act, 2017 relating to the recommendation of two names for each post by the Search-cum-Selection Committee and requiring the decision to be taken by the Government preferably within three months are declared to be unconstitutional.

3. Declared Section 184(11) of the Finance Act, 2017 prescribing tenure of four years is contrary to the principles of separation of powers, independence of the judiciary, rule of law and Article 14 of the Constitution of India, 1950.

4. Upheld the proviso to Section 184(11) of the Finance Act, 2017, the appointments made to the CESTAT pursuant to the interim orders passed by the Court shall be governed by the relevant statute and the rules framed thereunder that existed prior to 26.05.2017.

As per Justice Hemant Gupta,

5. The first, second and third proviso to Section 184(1) of the Finance Act, 2017, the use of the expression ‘preferably’ and the proviso to Section 184(11) of the Finance Act, 2017 are legal and valid as such provisions fall within the exclusive domain of the legislature.

6. Section 184(11)(i)(ii) of the Finance Act, 2017 and Section 184(7) of the Finance Act, 2017 is declared to be void as the Ordinance has reiterated the provisions which were in 2020 Rules.

 As per S. Ravindra Bhat,

7. The first proviso and the second proviso to Section 184(1) of the Finance Act, 2017, introduced by Section 12 of the Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 is declared void and inoperative.

8. Sections 184(7) and 184(11)(i) and (ii) of the Finance Act, 2017 introduced by Section 12 of the Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 is declared void and inoperative.

9. The retrospective given to the proviso to Section 184(11) of the Finance Act, 2017 is upheld;

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