Supreme Court of The United States
Case BriefsForeign Courts

Supreme Court of the United States (SCOTUS): In a 6-3 ruling, Court expressed that, Emotional distress damages are not recoverable in a private action to enforce either the Rehabilitation Act of 1973 or the Affordable Care Act, Roberts C.J., delivered the opinion of the Court, in which Thomas, Alito, Gorsuch, Kavanaugh and Barret, JJ., joined, whereas. Kavanaugh, J., filed a concurring opinion, in which Gorsuch, J., joined and Breyer, J., filed a dissenting opinion, in which Sotomayor and Kagan, JJ., joined.

Factual Background

Jane Cummings, who was deaf and legally blind, sought physical therapy services from Premier Rehab Keller and asked Premier Rehab to provide an American Sign Language interpreter for her sessions. Premier Rehab declined to do so, telling Cummings that the therapist could communicate with her through other means.

Later a lawsuit was filed seeking damages and other relief against Premier Rehab, alleging that its failure to provide an ASL interpreter constituted discrimination on the basis of disability in violation of the Rehabilitation Act of 1973 and the Affordable Care Act.

Premier Rehab was subject to the above statutes, which apply to entities that receive federal financial assistance, because it received reimbursement through Medicare and Medicaid for the provision of some of its services.

Further, the District Court determined that the only compensable injuries allegedly caused by Premier Rehab were emotional in nature. It held that damages for emotional harm are not recoverable in private actions brought to enforce either statute. The District Court thus dismissed the complaint, and the Fifth Circuit affirmed.

Whether emotional distress damages may be recovered under the Spending Clause statute?

Court noted that the statutes are silent with regard to the available remedies.

It was stated that there is no basis in contract law to maintain that emotional distress damages were “traditionally available in suits for breach of contract”.

Hence, emotional distress damages are not traditionally available in suits for breach of contract, for emotional distress, therefore, it was held that emotional distress damages are not recoverable under the Spending Clause anti-discrimination statutes.

None of the laws that protect against disability discrimination allows victims to recover for their emotional distress.

Concurring

Justice Kavanaugh and Justice Gorsuch said that the contract law analogy was imperfect and would reorient the inquiry to focus on a background interpretive principle rooted in the Constitution’s separation of powers.

Dissenting

Justice Breyer with whom Justice Sotomayor and Justice Kagan joined, with dissenting opinion that, compensatory damages under Civil Rights Act of 1964, Title VI, 42 U. S. C. §2000d; Education Amendments Act of 1972, Title IX, 20 U. S. C. §1681; Rehabilitation Act of 1973, §504, 29 U. S. C. §794; Patient Protection and Affordable Care Act (ACA), §1557, 42 U. S. C. §18116, cannot include compensation for emotional suffering.

Further, it was expressed that the Spending Clause statutes prohibit intentional invidious discrimination, and that kind of discrimination causes emotional disturbance. Hence, applying the contract analogy, victims of intentional violations of the anti-discrimination statutes can recover compensatory damages for emotional suffering.

Additionally, it was observed that the damages for emotional suffering have long been available as remedies for suits in breach of contract at least where the breach was particularly likely to cause suffering of that kind.

“Contract law treatises make clear that expected losses from the breach of a contract entered for nonpecuniary purposes might reasonably include nonpecuniary harms. So contract law traditionally does award damages for emotional distress “where other than pecuniary benefits [were] contracted for” or where the breach “was particularly likely to result in serious emotional disturbance.”

 [Cummings v. Premier Rehab Keller, 2022 SCC OnLine US SC 4, decided on 28-4-2022]

Case BriefsSupreme Court

Supreme Court: The bench of L. Nageswara Rao* and BR Gavai, JJ has held that the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 encroaches upon the judicial power of the State and hence, is liable to be declared unconstitutional.

The Kerala High Court had, on 9th July 2013, held the State Act to be beyond the legislative competence of the Kerala State Legislature and as such, held the same to be unconstitutional. The High Court had also held that the State Act had an effect of annulling the awards of the arbitrators and the judgments and decrees passed by the courts. It was therefore held that the State Act encroaches upon the judicial   power of the State. Being aggrieved thereby, the State of Kerala had approached the Supreme Court.

Section 3 of the State Act provides for “Cancellation of arbitration clauses and revocation of authority   of arbitrator”. Sub-section (1) provides that notwithstanding anything contained in the Contract Act, 1872 or in the Arbitration Act, 1940 or in the Arbitration and Conciliation Act, 1996 or in any other law for the time being in force or in any judgment, decree or order of any court or other authority or in any   agreement or other instrument, the arbitration clauses in every agreement shall stand cancelled; the authority of an arbitrator appointed under an agreement referred to in clause (i) shall stand revoked;   and any agreement referred to in clause (i) shall cease to have effect insofar as it relates to the matters in dispute or difference referred. The same shall be with effect on and from the date of commencement of the State Act. Sub-section (2) provides that nothing provided in subsection (1) of Section 3 of the State Act shall be a bar for any party to an agreement to file a suit in the court having jurisdiction in the matter to which the agreement relates and all questions regarding the validity or effect of the agreement between the parties to the agreement or persons claiming under them and all matters in dispute or difference between the parties to the agreement shall be decided by the court, as if the arbitration clauses had never been included in the agreement.

It is important to note that the list containing details of the Kerala arbitration cases involved in the present matters revealed that in most of the cases, the awards were passed prior to the year 1992 and the awards were made rule of the court prior to the year 1993. In some of the matters, on the date of the enactment of the State Act, the appeals preferred by the State under Section 39 of the 1940 Act were pending before the competent courts.

The Supreme Court, in a 125-pages-long verdict, elaborately considered the scheme under Sections 15, 16 and 17 of the Arbitration Act, 1940 and observed that before making an award “Rule of Court” by passing a judgment and decree, the court is required to take into consideration various factors, apply its mind and also exercise its discretion judicially. The power exercised by the court under Section 17 of the 1940 Act is a judicial power.

Further, the perusal of the various judgments of the Supreme Court also fortified the position that the   powers exercised by the court under the provisions of the 1940 Act are judicial powers and that the power to make an award “Rule of Court” is not a mechanical power.

The Court observed,

“… the powers exercised by the Chief Justice of the High Court or Chief Justice of India under Section 11(6) of the 1996 Act are not administrative but are judicial powers. It would thus not sound to reason, that when a power under Section 11(6) of the 1996 Act for appointment of an arbitrator has been held to be a judicial power, the power to make an award a “Rule of Court”, which can be made only upon the satisfaction of the court on the existence of the 114 eventualities set out in Section 17 of the 1940 Act, is not an exercise of judicial power.”

In the present case, it was noticed that what has been done by the State Act, is annulling the awards and the judgments and decrees passed by the court vide which the awards were made “Rule of Court”. As such, the rights which accrued to the parties much prior to the enactment of the State Act have been sought to be taken away by it. Hence,

“… the State Act, which has the effect of annulling the awards which have become “Rules of Court”, is a transgression on the judicial functions of the State and therefore, violative of doctrine of “separation of powers”. As such, the State Act is liable to be declared unconstitutional on this count.”

[Secretary to Govt. of Kerala, Irrigation Department v. James Verghese,  2022 SCC OnLine SC 545, decided on 04.05.2022]


*Judgment by: Justice L. Nageswara Rao


Counsels

For Appellants: Senior Advocates Jaideep Gupta, and Pallav Shishodia

For Respondents: Senior Advocates Krishnan Venugopal, P.C. Sen,  C.N. Sreekumar and Advocates Haripriya Padmanabhan, Kuriakose Varghese, John Mathew and Roy Abraham

Op EdsOP. ED.

In a democratic setup, the popular will of people prevails. The citizens of India get to choose their candidates, who in return prioritise the well-being of these people by trying to establish a welfare State. The right to vote as enshrined in the Indian Constitution is an incredible power which is saddled upon every citizen of the country, who is not less than 18 years of age while exercising this power. The responsibility which shadows this right is to choose a representative who will further the well-being of the society and the country at large. The conclusive goal of this universal adult franchise is to maintain transparency in elections and to make them free and fair.

India saw its first election in the year 1951, which was held to the Lok Sabha. At that time, the people of the country were in awe of the fact that they could choose their representatives and these representatives would form a government. The candidates at that time had to resort to door-to-door campaign to spread awareness about the right to vote as well as their candidature. Documentaries were played in cinema halls across the country to promote adult franchise. One of the insurmountable impediments faced at that time was the daunting rate of illiteracy in the country. Use of symbols by political parties was a quick fix to overcome this problem and it helped the citizens remember who they had to vote for. During those times, the criteria for people to select their representatives dominantly circled around the face value of candidates and the promises made by them.

Unlike those times, the citizens nowadays have become vigilant and are conscious about the developments around the world. But the question that arises at this juncture is — whether the citizens are conscious enough about the representatives they choose, who form the Government and run the country?

The expression “criminalisation in politics” comes into spotlight here. This could precisely be defined as participation of candidates in politics, who have criminal antecedents. These candidates can contest elections from different political parties and get elected to the post they are contesting for. The undue influence that these people with criminal antecedents exercise on the public and their fear amongst all as well as existence of casteism, has opened floodgates for them to enter into politics and enlarge their vote bank by resorting to malpractices as well as by using their influence which they have on a particular section/s of people. The political parties hanker on two major requirements: (1) a large enough vote bank and influence over the public for ensuring unprecedented support; and (2) infusing funds in the campaign to make sure the public can see party’s grandeur. Political parties are always on a lookout for such candidates who can aid the parties in fulfilling these requirements. These parties while campaigning for elections, try to portray a clean image of its candidates, regardless of the criminal cases pending against any or all of them. This evident growth in the menace caused by the infiltration by the candidates with criminal antecedents in Indian politics was and is a major concern.

At this very point the Indian judiciary stepped in to uphold the rights of the citizens of the country and also to safeguard the democratic setup. In a recent ruling in Brajesh Singh v. Sunil Arora[1] the Supreme Court of India went on to emphasise the need for maintaining purity in the political system of the country to uphold the democracy and ensure its proper functioning. The Bench comprising of R.F. Nariman and B.R. Gavai, JJ., while hearing a contempt petition in the aforesaid case, deliberated upon the need for a system of checks and balances, and the duty of legislature to bring about necessary amendments in law to prohibit the candidates with criminal antecedents from contesting elections. The Bench referred to a catena of decisions of the Supreme Court to demonstrate how the judiciary had stepped in on various occasions to pass directions and safeguard the democratic set-up of the country. It further delineated the scheme of the Representation of the People Act, 1951 (Act of 1951)[2]. The Bench observed that the respondent political parties had flouted the previous directions passed by the Supreme Court while hearing the contempt petition in Rambabu Singh Thakur v. Sunil Arora[3], which in turn arose out of the case of Public Interest Foundation v. Union of India[4], wherein the Constitution Bench had passed certain directions for ensuring that a voter is fully aware about the particulars of the candidates, but the political parties had chosen to show disregard to those. While referring to the case of Union of India v. Assn. for Democratic Reforms[5], the Bench in Brajesh Singh[6] took assistance of the observations made therein which pertain to the requirement of furnishing of information by a candidate as to acquittals, discharge or conviction in relation to criminal offences in the past by way of affidavit so that a voter has the right to know full particulars of the candidate for whom he is going to vote, including whether the candidate has committed criminal offences in the past.

The Bench also adverted to the developments post the amendments which were carried out in the Act of 1951 as well as the Conduct of Election Rules, 1961[7]. The Court in Public Interest Foundation[8] while setting out Section 8[9] of the Act of 1951 and referring to the 244th Law Commission Report[10] titled “Electoral Disqualifications” of February 2014, issued directions contained in Para 116, which pertain to furnishing of complete information about the criminal antecedents of the candidates. The Court also took the efforts to suggest the Parliament to enact laws to ensure that entry of such candidates with serious criminal history are completely restricted from entering in the field of politics.

The Court in Brajesh Singh[11] expressed its anguish and dissatisfaction for the lack of initiative taken by the legislature to act upon the repetitive suggestions of the Court given through various decisions. Para 21 of the said judgment reads thus:

  1. The nation continues to wait, and is losing patience. Cleansing the polluted stream of politics is obviously not one of the immediate pressing concerns of the legislative branch of Government.

The Court also exhaustively contemplated about instances of false conviction of a candidate or registering a false case against a candidate due to political vendetta. The deliberation with regard to the interests of political parties, balanced with the interests of the voters ended up with the Court observing that, the political party would have the freedom of selecting the candidates of its choice, regardless of the fact that he has criminal antecedents, but what would be required in such a case is to give reasons in support of such selection, and the reasons could be dependent on various factors including qualifications, achievements and other merits but not on “mere winnability at the polls”. The Court made it clear that this was only to enable a voter to have all the necessary information, so that he can exercise his right to franchise in an effective manner, and that this in no way impinge upon the right of a political party to choose a candidate of its own choice.

Separation of powers

The Bench comprising of R.F. Nariman and B.R. Gavai, JJ. adverted to the doctrine of separation of powers, while explaining the inability of the judiciary to pass such directions, which were not supported by any statute or any provisions elsewhere. The concept of separation of powers is not as rigid in India as is under American or Australian Constitution but is needed to be adhered to for effective functioning of democracy.

Montesquieu finds that tyranny pervades when there is no separation of powers: There would be an end of everything, were the same man or same body, whether of the nobles or of the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the causes of individuals.[12]

Separation of powers is a barrier which is restraining the judiciary from going above and beyond by issuing strictures or directions which find no base in any of the existing laws in the country. This is a catch in the present scenario, as the Court has only been able to suggest the legislature to take steps which the judiciary cannot work upon and has been hopeful but ended- up expressing its anguish and helplessness due to the inaction of legislature in making laws to eradicate the criminalisation in politics. The Bench while referring to paras 24 and 25 in Public Interest Foundation[13], reiterated that the courts cannot legislate and that only legislature can enumerate the grounds for disqualification of a candidate whereas a court cannot add to such grounds.

The Bench in Brajesh Singh[14] in para 48 reiterated the position of law as has been fortified in Public Interest Foundation[15], that:

  1. … it would tantamount to adding a new ground for disqualification which is beyond the pale of the judicial arm of State. It observed that any attempt to the contrary would be a colourable exercise of judicial power for it is axiomatic that “what cannot be done directly ought not to be done indirectly” which is a well-accepted principle in the Indian judiciary.

Further, the relevancy of the following observations made by the Constitution Bench in Public Interest Foundation[16] is of a greater degree to understand the self-restraint practised by the Supreme Court in the backdrop of separation of powers:

  1. … Though criminalisation in politics is a bitter manifest truth, which is a termite to the citadel of democracy, be that as it may, the Court cannot make the law.
  2. Directions to the Election Commission, of the nature as sought in the case at hand, may in an idealist world seem to be, at a cursory glance, an antidote to the malignancy of criminalisation in politics but such directions, on a closer scrutiny, clearly reveal that it is not constitutionally permissible. The judicial arm of the State being laden with the duty of being the final arbiter of the Constitution and protector of constitutional ethos cannot usurp the power which it does not have.

After further fortifying the settled position of law related to the separation of powers, the Court exercised its contempt jurisdiction and held the respondent political parties liable for contempt of court for flouting the directions issued by it in Rambabu Singh Thakur[17]  and imposed suitable costs on the contemnors. The Bench went on to express its anguish and helplessness by observing that the hands of the judiciary have been tied by the constitutional scheme of separation of powers and that it is the need of the hour for the legislative arm of the State to carry out a major surgery for weeding out the malignancy of criminalisation in politics. Paras 75 and 76 in Brajesh Singh[18] read thus:

  1. No one can deny that the menace of criminalisation in the Indian political system is growing day by day. Also, no one can deny that for maintaining purity of political system, persons with criminal antecedents and who are involved in criminalisation of political system should not be permitted to be the lawmakers. The only question is, whether this Court can do so by issuing directions which do not have foundation in the statutory provisions.
  2. This Court, time and again, has appealed to the lawmakers of the country to rise to the occasion and take steps for bringing out necessary amendments so that the involvement of persons with criminal antecedents in polity is prohibited. All these appeals have fallen on the deaf ears. The political parties refuse to wake up from deep slumber. However, in view of the constitutional scheme of separation of powers, though we desire that something urgently requires to be done in the matter, our hands are tied and we cannot transgress into the area reserved for the legislative arm of the State. We can only appeal to the conscience of the lawmakers and hope that they will wake up soon and carry out a major surgery for weeding out the malignancy of criminalisation in politics.

Exercising its limited jurisdiction, the Supreme Court while departing with the judgment issued some further directions and clarified some previous ones. These directions were issued to the political parties as well as the Election Commission of India (ECI). The political parties were directed to publish information related to criminal antecedents of its candidates on its official website within 48 hours of selection of the candidate. The ECI was directed to create a dedicated mobile application for easy access of information to the voter. The directions included an extensive awareness campaign to be carried out by ECI to make the voter aware of his right to know and creation of a separate cell to monitor and ensure compliance of such directions.

Sequitur

However great the power is, it cannot be exercised if the field, where it is to be exercised, is compromised. The popular will of the people prevails in true sense only when the people are conscious about the representatives, they choose to form the Government and run the country. One major thing that has changed since the first general elections in the country is that the participation of such candidates with criminal antecedents has been on a substantial rise whereas, the level of awareness amongst the citizens has not been able to catch up with that rise. The judiciary since decades has been emphasising upon the purity of political system in the country and how the entry of candidates with criminal antecedents in politics has acted as an impediment in achieving the goal. It has not only hindered the free and fair elections but has shaken the very base of democracy, being the citizens of the country. The judiciary has time and again played the important role of a watchdog to the Indian democracy. The whole purpose of this drill was to ensure that the voter has an informed choice while exercising his right to vote. It is for securing the right to know of a voter which is the very fundamental of the adult franchise as well as the democratic set-up of the country. Though the courts have made their intentions about weeding out the malignancy of criminalisation in politics crystal clear, they cannot transgress into the area reserved for the legislative arm of the State due to the constitutional scheme of separation of powers. It is for the legislature to come up with solutions to such persisting problems once and for all.


2019 law graduate, Advocate and Law Clerk-cum-Research Assistant, Supreme Court of India, e-mail: <varadkilor@gmail.com>.

[1] (2021) 10  SCC 241 : 2021 SCC OnLine SC 571.

[2] <http://www.scconline.com/DocumentLink/fbg28G6d>.

[3] (2020) 3 SCC 733.

[4] (2019) 3 SCC 224.

[5] (2002) 5 SCC 294.

[6] (2021) 10  SCC 241 : 2021 SCC OnLine SC 571.

[7] <http://www.scconline.com/DocumentLink/3D658Ka7>.

[8] (2019) 3 SCC 224.

[9] <http://www.scconline.com/DocumentLink/yEw4UXp4>.

[10] <http://www.scconline.com/DocumentLink/WI0Nu79x>.

[11] (2021) 10 SCC 241, 264: 2021 SCC OnLine SC 571.

[12] I.R. Coelho v. State of T.N., (2007) 2 SCC 1.

[13] (2019) 3 SCC 224.

[14] (2021) 10  SCC 241 : 2021 SCC OnLine SC 571.

[15] (2019) 3 SCC 224

[16] (2019) 3 SCC 224

[17] (2020) 3 SCC 733.

[18] (2021) 10  SCC 241, 284 : 2021 SCC OnLine SC 571.

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Dhananjaya Y Chandrachud* and B. V. Nagarathna, JJ., had set aside the impugned interim order of Madras High Court holding it to be an attempt to re-write Rule 29(4) of the Copyright Rules 2013. The Bench remarked,

“The interim order converts the second proviso into a “routine procedure” instead of an exception (as the High Court has described its direction). This exercise by the High Court amounts to re-writing. Such an exercise of judicial redrafting of legislation or delegated legislation cannot be carried out.”

A few broadcasters had approached the Madras High Court to challenge the validity of Rule 29(4) of the Copyright Rules 2013 on the ground that it (i) violates Article 19(1)(a) of the Constitution; and (ii) is ultra vires Section 31D of the Act. The High Court, by its interim order had held that the duty which is cast on broadcasters in the notice to broadcast under Rule 29(1) is “apparently onerous”. Consequently, it directed that the petitioners before it may be permitted to resort to the second proviso to Rule 29(4) as a “routine procedure”, instead of an exception, subject to the duration of the ex post facto reporting being enlarged to fifteen days.

It was in the above backdrop that the instant appeal was initiated in the Supreme Court on the ground that the impugned interim order had the effect of re-writing Rule 29(4) of the Rules framed in pursuance of the provisions of Section 31D and Section 78(2)(cD) of the Copyright Act 1957.

Statutory Mandate

By the Copyright Amendment Act 2012, Parliament incorporated the provisions of Section 31D. Under sub-section (1) of Section 31D, a broadcasting organization which is desirous of communicating to the public by way of a broadcast or performance of a literary or musical work and sound recording which has already been published, may do so subject to compliance with the provisions of Section 31D. Section 31D(2) incorporates five requirements, namely:

  • a prior notice;
  • in the manner prescribed;
  • of the intention to broadcast the work;
  • stating the duration and territorial coverage of the broadcast; and
  • payment to the owner of rights in each work royalties in the manner and at the rate fixed by the Appellate Board.

Rule 29. Notice to owner for communication to the public of literary and musical works and sound recordings.—“(1) Any broadcasting organisation desirous of communicating to the public by way of broadcast or by way of performance of a published literary or musical work and sound recording under sub-section (1) of Section 31-D shall give a notice of its intention to the owner of the copyright and to the Registrar of Copyrights before a period of five days in advance of such communication to the public and shall pay to the owner of the copyright, in the literary or musical work or sound recording or any combination thereof, the amount of royalties due at the rate fixed by the Board in this regard:

Provided further that in case of communication to the public by way of broadcast or by way of performance of any published literary or musical work and sound recording or any combination thereof, in unforeseen circumstances, the notice shall, be given within twenty-four hours of such communication to the public:”

Contentions Raised

The appellants had challenged the interim order on the following grounds:

  1. By the interim order, the High Court re-wrote Rule 29(4), which is impermissible, in any event at the interim stage;
  2. The validity of Rule 29(4) was yet to be adjudicated upon and a presumption would attach to the constitutionality of both – the Rules and the Statute;
  3. There was no challenge to the validity of Section 31D in terms of which Rule 29 had been framed;
  4. The High Court had, in the course of its interim order, extended it only to the petitioners before it and to the broadcasters who had been impleaded as parties, as a result of which the pan-India operation of the Rule was left in the realm of uncertainty.

Observation and Analysis

Observing that the High Court had substituted the provisions of Rule 29(4) with a regime of its own, which was made applicable to the broadcasters and the petitioners before it, the Bench referred to the decision of the Constitution Bench in In Re: Expeditious Trial of Cases Under Section 13 138 of NI Act 188, wherein the Court had emphasized that, “the judiciary cannot transgress into the domain of policy making by re-writing a statute, however strong the temptations maybe.”

Reiterating that the court in the exercise of judicial review cannot supplant the terms of the provision through judicial interpretation by re-writing statutory language, the Bench expressed,

“Draftsmanship is a function entrusted to the legislature. Craftsmanship on the judicial side cannot transgress into the legislative domain by re-writing the words of a statute. For then, the judicial craft enters the forbidden domain of a legislative draft.”

Therefore, the Bench held that the High Court had entered the forbidden domain of legislative draft as it had held the broadcasters down to the requirement of prior notice, it had even modified the operation of Rule 29 by stipulating that the particulars which were to be furnished in the notice may be furnished within a period of fifteen days after the broadcast.

Hence, the Bench was of the view that an exercise of judicial re-drafting of Rule 29(4) was unwarranted, particularly at the interlocutory stage proceedings. The High Court was also of the view that the second proviso may be resorted to as a matter of routine, instead of as an exception and that the ex post facto reporting should be enlarged to a period of fifteen days (instead of a period of twenty four hours). Holding such exercise impermissible, the Bench expressed caution that it would substitute a statutory rule made in exercise of the power of delegated legislation with a new regime and provision which the High Court considers more practicable.

Accordingly, the appeals were allowed and the impugned interim order was set aside.

[Saregama India Ltd. v. Next Radio Ltd., 2021 SCC OnLine SC 817, decided on 27-09-2021]

____________________________________________________________________________________________

Report by: Kamini Sharma, Editorial Assistant, EBC Publishing Pvt. Ltd. 

____________________________________________________________________________________________

Counsels:

For the Appellants: Sr. Advocate Mukul Rohatgi and Sr. Advocate Akhil Sibal,

For the Respondents: Sr. Advocate Navroz Seervai and Sr. Advocate Neeraj Kishan Kaul


*Judgment by: Justice Dr. Dhananjaya Y Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

Case BriefsSupreme Court

Supreme Court: A 3-Judge Bench of the Supreme Court, by a majority of 2:1, has declared that certain portions of Section 184 of the Finance Act, 2017 as amended by the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 are unconstitutional and inoperative. Section 184 consists of provisions relating to the qualifications, appointment, etc., of Chairperson and Members of tribunals. The majority was formed by L. Nageswara Rao, J. who delivered the leading opinion, and S. Ravindra Bhat, J. penning a separate concurring opinion. Whereas, Hemant Gupta, J. wrote a substantially dissenting opinion.

The Challenge

The Madras Bar Association filed the instant writ petition seeking a declaration that Section 12 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 (“Ordinance”) and Section 184 of the Finance Act, 2017 as amended by the Ordinance are ultra vires Articles 14, 21 and 50 of the Constitution of India inasmuch as these are violative of the principles of separation of powers and independence of judiciary, apart from being contrary to the principles laid down by several earlier judgments[1] of the Supreme Court.

The dispute raised in the writ petition relates to:

(i) First proviso to Section 184(1) according to which a person below the age of 50 years shall not be eligible for appointment as Chairperson or Member; and also the second proviso, read with the third proviso, which stipulates that the allowances and benefits payable to Chairpersons and Members shall be the same as a Central Government officer holding a post carrying the same pay as that of the Chairpersons and Members.

(ii) Section 184(7) which stipulates that the Selection Committee shall recommend a panel of two names for appointment to the post of Chairperson or Member and the Central Government shall take a decision preferably within three months from the date of the recommendation of the Committee, notwithstanding any judgment, order or decree of any Court.

(iii) Section 184(11) which shall be deemed to have been inserted with effect from 26-5-2017, provides that the term of office of the Chairperson and Member of a tribunal shall be four years. The age of retirement of the Chairperson and Members is specified as 70 years and 67 years, respectively. As per the proviso, if the term of office or the age of retirement specified in the order of appointment issued by the Central Government for those who have been appointed between 26-5-2017 and 4-4-2021 is greater than that specified in Section 184(11), the term of office or the age of retirement shall be as set out in the order of appointment, subject to a maximum term of office of five years.

The Finance Act and the Ordinance

The Finance Act, 2017 was brought into force from 31-3-2017 to give effect to the financial proposals for the financial year 2017-18. Sections 183 to 189 thereof dealt with conditions of service of Chairperson and Members of Tribunals, Appellate Tribunals and other authorities.

The Tribunal Reforms (Rationalisation and Conditions of Service) Bill, 2021 was introduced in the Lok Sabha on 13-2-2021 but could not be taken up for consideration. According to the Statement of Objects and Reasons, the said Bill was proposed with a view to streamline tribunals and sought to abolish certain tribunals and other authorities, which “only add to another additional layer of litigation” and were not “beneficial for the public at large”. Thereafter, the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 was promulgated on 4-4-2021. Chapter XI thereof makes amendments to the Finance Act, 2017.

Discussion and Observations

  1. Separation of Power

Discussing this indispensable concept, the Court said that the doctrine of separation of powers, though not expressly engrafted in the Constitution, its sweep, operation and visibility are apparent from the scheme of the Indian Constitution. It forms part of basic structure of the Constitution. The Constitution has made demarcation, without drawing formal lines between the three organs ─ legislature, executive and judiciary, which is nothing but a consequence of principles of equality enshrined in Article 14 of the Constitution. Accordingly, breach of separation of judicial power may amount to negation of equality under Article 14. Stating thus, the Court reaffirmed:

Violation of separation of powers would result in infringement of Article 14 of the Constitution. A legislation can be declared as unconstitutional if it is in violation of the principle of separation of powers.

  1. Independence of Judiciary

On this point, the Court recorded that independence of judiciary is a fighting faith of our Constitution. It is cardinal principle of the Constitution that an independent judiciary is the most essential characteristic of a free society like ours and the judiciary which is to act as a bastion of the rights and freedom of people is given certain constitutional guarantees to safeguard independence of judiciary. An independent and efficient judicial system has been recognised as a part of basic structure of our Constitution.

After discussing Article 50 (which provides that the State shall take steps to separate the judiciary from the executive in the public services of the State) and Article 37 (which declares that the principles laid down in Part IV of the Constitution are fundamental in the governance of the country and it should be the duty of the State to apply the principles in making laws), the Court observed:

[Independence] is the lifeblood of the judiciary. … It is the freedom from interference and pressures which provides the judicial atmosphere where [a Judge] can work with absolute commitment to the cause of justice and constitutional values. It is also the discipline in life, habits and outlook that enables a Judge to be impartial. Its existence depends however not only on philosophical, ethical or moral aspects but also upon several mundane things ─ security in tenure, freedom from ordinary monetary worries, freedom from influences and pressures within (from others in the judiciary) and without (from the executive).

  1. Judicial Decisions and Legislative Overruling

The controversy that arose for consideration of the Court in the instant writ petition relates to the legislative response to the judgment of the Court in Madras Bar Assn. v. Union of India, 2020 SCC OnLine SC 962 (“Madras Bar Assn. case“). In that case, the validity of the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020 (“2020 Rules”) was challenged by the Madras Bar Association. The relevant portions of the decision in Madras Bar Assn. case along with the affect of the Ordinance are discussed below at relevant place.

(A) Judicial Review

Appreciating the scope of judicial review of ordinances, the Court noted that it is the same as that of a legislative act. Article 123 of the Constitution empowers the President to promulgate an ordinance during recess of the Parliament, which shall have the same force and effect as an act of the Parliament. The validity of an ordinance can be challenged on grounds available for judicial review of a legislative act.

The power to strike down primary legislation enacted by the Union of India or the State legislatures is on limited grounds. Where there is challenge to the constitutional validity of a law enacted by the legislature, the Court must keep in view that there is always a presumption of constitutionality of an enactment and a clear transgression of constitutional principles must be shown. The Court reiterated that:

[S]ans flagrant violation of the constitutional provisions, the law made by Parliament or a State legislature is not declared bad and legislative enactment can be struck down only on two grounds: (i) that the appropriate legislature does not have the competence to make the law, and (ii) that it takes away or abridges any of the fundamental rights enumerated in Part III of the Constitution or any other constitutional provisions. [‘Manifest arbitrariness’ is also recognised] as a ground under Article 14 on the basis of which a legislative enactment can be judicially reviewed.

(B) Permissible Legislative Overruling

The Court culled out the principles in accordance with which legislative overruling could be permissible:

(i) The effect of the judgments of the Court can be nullified by a legislative act removing the basis of the judgment. Such law can be retrospective. Retrospective amendment should be reasonable and not arbitrary and must not be violative of the fundamental rights guaranteed under the Constitution.

(ii) The test for determining the validity of validating legislation is that the judgment pointing out the defect would not have been passed, if the altered position as sought to be brought in by the validating statute existed before the Court at the time of rendering its judgment. In other words, the defect pointed out should have been cured such that the basis of the judgment pointing out the defect is removed.

(iii) Nullification of mandamus by an enactment would be an impermissible legislative exercise. Even interim directions cannot be reversed by a legislative veto.

(iv) Transgression of constitutional limitations and intrusion into the judicial power by the legislature is violative of the principle of separation of powers, the rule of law and of Article 14 of the Constitution of India.

Validity of the Ordinance and Amended Provisions

The grievance of the petitioners was mainly related to the violation of the first proviso and the second proviso, read with the third proviso, to Section 184(1), Sections 184(7) and 184(11) of the Finance Act, 2017 as amended by the Ordinance.

  1. Section 184(1)

(A) The first proviso of Section 184(1) provides minimum age for appointment as Chairperson or Member of a tribunal as 50 years.

One of the issues considered in Madras Bar Assn. case was the correctness of the conditions imposed in the 2020 Rules that an advocate is eligible for appointment as a Member only if he has 25 years of experience. It is relevant to state that advocates were ineligible for most of the tribunals. In Madras Bar Assn. case, the Court found the exclusion of advocates from being appointed as Members to be contrary to earlier judgments of the Court. In such view of the matter, a direction was given to amend the 2020 Rules to make advocates with at least 10 years of experience at the bar eligible for appointment as Members in tribunals.

Discussing that the direction given in the nature of mandamus in Madras Bar Assn. case is to the effect that advocates are eligible for appointment as Members, provided they have experience of 10 years, the Court in the instant petition observed:

The first proviso to Section 184 which prescribes a minimum age of 50 years is an attempt to circumvent the direction issued in Madras Bar Assn. case striking down the experience requirement of 25 years at the bar for advocates to be eligible. Introduction of the first proviso to Section 184(1) is a direct affront to the judgment of this Court in Madras Bar Assn. case.”

Underlining the importance of recruitment of Members from the bar at a young age to ensure a longer tenure, the Court was of the view that fixing a minimum age for recruitment of Members as 50 years would act as a deterrent for competent advocates to seek appointment. Practically, it would be difficult for an advocate appointed after attaining the age of 50 years to resume legal practice after completion of one term, in case he is not reappointed. Security of tenure and conditions of service are recognised as core components of independence of the judiciary. Independence of the judiciary can be sustained only when the incumbents are assured of fair and reasonable conditions of service, which include adequate remuneration and security of tenure.

The Court found that first proviso to Section 184(1) is in violation of the doctrine of separation of powers as the judgment Madras Bar Assn. case has been frustrated by an impermissible legislative override.

Resultantly, the first proviso to Section 184(1) was declared unconstitutional as it is violative of Article 14 of the Constitution.

It was directed that the selections conducted for appointment of Members, ITAT pursuant to the advertisement issued in 2018 should be finalised and appointments made by considering the candidates between 35 to 50 years as also eligible.

Ravindra Bhat, J., in his separate concurring opinion said that:

Prescribing 50 years as a minimum age limit for consideration of advocates has the devastating effect of entirely excluding successful young advocates, especially those who might be trained and competent in the particular subject (such as Indirect Taxation, Anti-Dumping, Income-Tax, International Taxation and Telecom Regulation). The exclusion of such eligible candidates in preference to those who are more than 50 years of age is inexplicable and therefore entirely arbitrary.

(B) The second proviso to Section 184(1) 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.

In Madras Bar Assn. case, the Court considered Rule 15 of the 2020 Rules according to which, Chairpersons and Members of tribunals were entitled to House Rent Allowance at the same rate as admissible to officers with the Government of India holding Group ‘A’ post carrying the same pay. In that case, it was noted that an amount of Rs 75,000 per month which was paid as HRA was not sufficient to get a decent accommodation in Delhi for Chairpersons and Members of tribunals. Taking note of the serious problem of housing and the inadequate amount that was being paid as HRA to the Members, the Court in that case directed enhancement of HRA to Rs 1,25,000 per month to the Members and Rs 1,50,000 per month to Chairperson or Vice-Chairperson or President of tribunals. This direction was made effective from 1-1-2021.

Noting the submission of the Amicus Curiae that result of the instant amendment made by the Ordinance is that the Members of tribunals working in Delhi will get Rs 60,000 as HRA, the Court was of the view that the second proviso to Section 184(1), read with the third proviso, is an affront to the judgment in Madras Bar Assn. case. The direction issued in Madras Bar Assn. case for payment of HRA was to ensure that decent accommodation is provided to tribunal Members. Such direction was issued to uphold independence of the judiciary and it cannot be subject matter of legislative response. The Court held that a mandamus issued by the Supreme Court cannot be reversed by the legislature as it would amount to impermissible legislative override.

Therefore, the second proviso, read with the third proviso, to Section 184(1) was declared as unconstitutional.

The Court noted that after the judgment in the instant writ petition was reserved on 3-6-2021, the Ministry of Finance amended the 2020 Rules whereby the earlier Rule 15 was substituted[2]. The Explanatory Memorandum at the end of the notification states that the amendment to Rule 15 of the 2020 Rules on HRA, shall be given retrospective operation with effect from 1-1-2021, in order to give effect to the judgment in Madras Bar Assn. case. The Court was of the opinion that this amendment to Rule 15 is in conformity with the directions on the subject of HRA in Madras Bar Assn. case. In view thereof, no further direction is required to be given with respect to HRA.

  1. Section 184(7)

(A) Section 184(7) stipulates that a Search-cum-Selection Committee shall recommend a panel of two names for appointment to the post of Chairperson or Member and the Central Government shall take a decision preferably within three months from the date of the recommendation of the Committee, notwithstanding any judgment, order or decree of any Court.

Rule 4(2) of the 2020 Rules pertains to the procedure to be followed by the Selection Committee. According to the said Rule, the Selection Committee should recommend two or three names for appointment to each post. A direction was given in Madras Bar Assn. case to amend Rule 4(2) of the 2020 Rules to provide that the Selection Committee shall recommend one person for appointment in each post in place of a panel of two or three persons for appointment to each post.

The Court recorded that sufficient reasons were given in Madras Bar Assn. case to hold that executive influence should be avoided in matters of appointments to tribunals ─ therefore, the direction that only one person shall be recommended to each post. The decision of the Court in that regard is law laid down under Article 141 of the Constitution. The only way the legislature could nullify the said decision was by curing the defect in Rule 4(2). There is no such attempt made except to repeat the provision of Rule 4(2) of the 2020 Rules in the Ordinance amending the Finance Act, 2017.

Ergo, Section 184(7) was declared to be unsustainable in law as it is an attempt to override the law laid down by the Supreme Court.

(B) The second part of Section 184(7) provides that the Government shall take a decision regarding the recommendations made by the Selection Committee preferably within a period of three months. This was in response to the direction in Madras Bar Assn. case that the Government shall make appointments to tribunals within three months from the completion of the selection and recommendation by the Selection Committee.

Such direction, the Court noted, was necessitated in view of the lethargy shown by the Union of India in making appointments and filling up the posts of Chairpersons and Members of tribunals which have been long vacant. The direction given in Madras Bar Assn. case for expediting the process of appointment was in the larger interest of administration of justice and to uphold the rule of law.

The Court held, Section 184(7) as amended by the Ordinance permitting the Government to take a decision preferably within three months from the date of recommendation of the Selection Committee is invalid and unconstitutional, as this amended provision simply seeks to negate the directions of the Supreme Court.

  1. Section 184(11)

(A) The tenure of the Chairperson and Member of a tribunal is fixed at four years by Section 184(11), notwithstanding anything contained in any judgment, order or decree of any court. Sub-section (11) of Section 184 has been given retrospective effect from 26-5-2017.

Rule 9 of 2020 Rules had specified the term of appointment of the Chairperson or Member of the Tribunal as four years.  After perusing the law laid down by earlier judgments that a short stint is anti-merit, the Court in the Madras Bar Assn. case directed the modification of tenure in Rules 9(1) and 9(2) as five years in respect of Chairpersons and Members of tribunals.

The Court, in the instant petition, held that insertion of Section 184(11) prescribing a term of four years for the Chairpersons and Members of tribunals by giving retrospective effect to the provision from 26-5-2017 is clearly an attempt to override the declaration of law by the Supreme Court under Article 141 in the Madras Bar Assn. case.

Therefore, clauses (i) and (ii) of Section 184(11) were declared as void and unconstitutional.

(B) The proviso to Section 184(11) refers to appointments that were made to the posts of Chairperson or Members between 26-5-2017 and the notified date, i.e., 4-4-2021. The proviso lays down that the term of office of Chairperson and Members of tribunals who were appointed between 26-5-2017 and 4-4-2021 shall be five years even though the order of appointment issued by the Government had a higher term of office or age of retirement.

On this point, the Court referred to the interim directions given by the Supreme Court on 9-2-2018 in Kudrat Sandhu v. Union of India, 2018 SCC OnLine SC 2898 wherein it was held that all selections to the post of Chairperson/ Chairman, Judicial/ Administrative Members shall be for a period as provided in the Act and the Rules in respect of all tribunals. Reference was also made to certain subsequent orders passed in the same case of Kudrat Sandhu.

Coming back to the instant petition, the Court was of the opinion that though, there is nothing wrong with the proviso to Section 184(11) being given retrospective effect, the appointments made pursuant to the interim directions passed by the Supreme Court cannot be interfered with. The Court pointed out that even the interim orders passed by the Supreme Court cannot be overruled by a legislative act.

While making it clear that the appointments that are made to the CESTAT on the basis of interim orders passed by the Supreme Court shall be governed by the relevant statute and the rules framed thereunder, as they existed prior to the Finance Act, 2017, the Court upheld the retrospectivity given to the proviso to Section 184(11). Clarifying further, the Court stated that appointments after 4-4-2021 shall be governed by the Ordinance, as modified by the directions in the instant judgment.

Consequently, Section 12 of the Ordinance making amendments in the earlier Section 184 of the Finance Act, 2017, also stands invalidated.

The Dissent

Lastly, it may also be mentioned that the upshot of the dissenting opinion written by Hemant Gupta, J. (as summarised by S. Ravindra Bhat, J. in his opinion) was that as regards prescription of minimum age or with respect to conditions of service such as payment of house rent allowance, the Court ought to respect legislative wisdom; and that the directions issued in past judgments cannot bind Parliament, as they fell outside the judicial sphere.

The writ petition stood disposed of in terms of the majority judgment. [Madras Bar Assn. v. Union of India, 2021 SCC OnLine SC 463, decided on 14-7-2021]


[1] Union of India v. Madras Bar Assn., (2010) 11 SCC 1; Madras Bar Assn. v. Union of India, (2014) 10 SCC 1; Rojer Mathew v. South Indian Bank Ltd., (2020) 6 SCC 1; and Madras Bar Assn. v. Union of India, 2020 SCC OnLine SC 962

[2] Vide Rule 6, the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) (Amendment) Rules, 2021


Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

OP. ED.SCC Journal Section Archives

— Indian Supreme Court in the process of transition — Position till early 1970’s and after — Concepts used to avoid change stated — Activist judges — Contribution of Justice Bhagwati — Some highlights of transformation of Indian jurisprudence at the instance of Justice Bhagwati in the judicial process — PIL is a major strategy in the area of legal aid to the poor — Greatest Contribution of Chief Justice Bhagwati — Decisions on Legal Aid — Observations of Justice Bhagwati in Hussainara Khatoon (1980) and Suk Das (1986) — Major thrusts gave to PIL by Justice Bhagwati briefly examined — Observations in Judges transfer case (1981) quoted — Letter petitions in PIL — Contribution of Justice Bhagwati in PIL is certainly enormous — Judicial employment and Human Rights with social justice — Inter-relation of Parts III and IV of the Constitution of India — Case laws referred to and discussed in this regard — Facets of Art. 21 — Case laws cited — Revolutionary interpretation to Art. 21 by Justice Bhagwati — Judicial Reforms and People’s participation — Lok Adalats — Contribution of Justice Bhagwati — Concluding note — Bhagwati era will find a special place for its signal contribution to human rights development and judicial creativity in the cause of social justice

The Indian Supreme Court is in the process of transition. Till early 1970s the Court with few honourable exceptions, acted as an instrument of status quo upholding the traditions of Anglo-Saxon jurisprudence and resisting radical innovations in the use of judicial power to promote social change under the Republican Constitution. The natural inclination of lawyers and Judges was to look for precedents in the “Mother Country” and to interpret a revolutionary document like the Constitution of India in the light of a socio-economic philosophy alien to our freedom movement and the aspirations of a liberated people. Concepts such as “Rule of Law”, “Judicial Restraint”, “Separation of Powers”, “Supremacy of Fundamental Rights over Directive Principles”, “Independence of Judiciary”, “Contempt of Court” and “Certainty in Law” were used conveniently to avoid change wherever possible, delay it whenever inevitable and dilute it as far as practicable. The resultant legal culture was not very different from those of pre-Independence days.

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Note: This article was first published in Supreme Court Cases Journal  (1987) 1 SCC J-1. It has been reproduced with the kind permission of Eastern Book Company.

Chhattisgarh High Court
Case BriefsHigh Courts

Chhattisgarh High Court: Goutam Bhaduri, J., while dismissing the present petition held that,

Legislature has before it a full panoply of legislative powers and as an incident of those powers, the express constitutional authority to disapprove an ordinance. If an ordinance has to continue beyond the tenure which is prescribed by Article 213(2)(a), a law has to be enacted by the legislature incorporating its provisions.

Petitioners counsel submitted that notification inviting application by Public Service Commission respondent 1 was published on 27-11-2019 pursuant to official communication of 23-11-2019.

It has been submitted that the above-said notification did not carve out any space for the Economically Weaker Section (EWS) which was brought about by the Constitution (One Hundred and Third Amendment) Act, 2019.

Governor of Chhattisgarh had promulgated the Ordinance of 2019 as the State Legislature was not in session.

Legislative Assembly of the State was held on 2nd and 3rd October, 2019, but no legislative business was laid held. For the legislative business, the Assembly started on 25-11-2019 till 02-12-2019 and therefore the ordinance which was promulgated on 04-09-2019 would hold the field.

If the State took the decision to conduct an examination prior to publication of the notification, it would amount to playing fraud with the Constitution. He also referred to the case Krishna Kumar Singh v. State of Bihar, (2017) 3 SCC 1, and submitted that laying of an Ordinance before the legislature is mandatory.

State Counsel submitted that the Ordinance by the Governor was on 04-09-2019 and re-assmbly took place on 02-10-2019, therefore by virtue of Article 213 (2), six weeks expired on 13-11-2019 and the Ordinance ceased to operate. Subsequently, even if re-assembly of State Legislature started on 25-11-2019 till 02-12-2019 even after expiry of six weeks therefrom ordinance was not laid in the House, therefore, mandamus to this effect cannot be issued the Court.

Analysis

“Article 174 shows that the Governor has power to call for the sessions of the State Legislature and the time limit gap of 6 months is provided. Article 213 further gives power to the Governor to promulgate the Ordinance during the recess of Legislature.”

Since Article 213(2) mandates that the ordinance will expire from six weeks of the date of reassembly of the legislature, the ordinance having not been laid before the legislative assembly, within six weeks it would expire on 13-11-2019. Consequently, the said Article shows that after 13-11-2019, the ordinance ceased to function in operation.

Thus, keeping in view the facts and circumstances of the case and on perusal of the above-stated analysis, it is apparent that, if the State has not placed ordinance for EWS in the Legislative Assembly, the Court cannot issue a writ to promulgate the ordinance by way of mandamus on the principles of separation of powers.

Court also clarified that the reliance place on Krishna Kumar Singh v. State of Bihar, (2017) 3 SCC 1 does not endorse the view that if the ordinance is not placed within the time prescribed under Article 213(2), the Court will assume such power of effective review or reconsideration.

Laying of an Ordinance before the State Legislature sub-serves the purpose of Legislative control over the ordinance-making power.

Therefore, Court cannot issue a writ of mandamus to Legislature as it would amount to encroaching the turf of the State Legislature. [Irfan Qureashi v. Chhattisgarh State Public Sevice Commission, 2020 SCC OnLine Chh 7, decided on 07-02-2020]

Case BriefsForeign Courts

Federal Court of Malaysia: A Full Bench of Richard Malanjum, Ahmad Maarop, Zaharah Ibrahim, David Wong Dak Wah, Ramly Ali, Azahar Mohamed, Alizatul Khair Osman Khairuddin, Mohd Zawawi Salleh and Idrus Harun, JJ. concluded that vesting of judicial powers in Shariah Advisory Council (‘SAC’) does not violate the doctrine of separation of powers.

The fundamental question put forward before the court was that whether Sections 56 and 57 of the Central Bank of Malaysia Act, 2009 were in breach of the Federal Constitution and unconstitutional by reason of contravening Part IX of the Federal Constitution for the said sections having the effect of vesting judicial power in the SAC. The main issue was whether the impugned provisions violated the doctrine of separation of powers.

The Court referring to Semenyih Jaya Sdn Bhd v. Pentadbir Tanah Daerah Hulu Langat, (2017) 4 AMR 123 observed that the doctrine of separation of powers was sacrosanct in the constitutional framework and was a part of the basic structure of the Federal Constitution but at the same time the doctrine also recognized that, wherever necessary, one branch of the government should be allowed to exercise part of the powers of another branch and the delegation of power by one branch of the government to another. Reliance was also placed on Tan Sri Abdul Khalid Ibrahim v. Bank Islam Malaysia Berhad, (2010) 4 CLJ 388 wherein it was explained that it was necessary to designate the SAC to ascertain the acceptable Shariah position.

The 2009 Act which established the SAC of CBM as the authority and reference point for the ascertainment of Islamic law for the purposes of Islamic banking and financial business was held by the Court as a proper constitutional mechanism to assist the courts in applying the correct Islamic laws to resolve Islamic financial disputes and upholding Shariah complaint on such matters, as permitted by the Federal Constitution.

The Court referred to Lord Reed’s remarks at the 32nd Sultan Azlan Shah Law 28 Lecture, 2018, where he said, “Neither the separation of powers, nor the principle of judicial independence, means that the courts have to be isolated from the other branches of the State”.

In view of above, the Court concluded that the impugned provisions did not trespass or intrude onto the judicial power and hence did not violate the doctrine of separation of powers.[JRI Resources SDN BHD v. Kuwait Finance House (Malaysia) Berhad,  2019 SCC OnLine MYFC 1, decided on 19-04-2019]

Cyril Amarchand MangaldasExperts Corner

Background

In a landmark decision on 10-4-2019[1], a Division Bench of the High Court of Delhi (Delhi HC), pronounced a judgment relating to a batch of petitions filed by car manufacturers wherein the constitutionality of certain provisions of the Competition Act, 2002 (Act) was challenged. The genesis of the matter arose from the Competition Commission of India’s (CCI) findings in what has come to be known as the Auto Parts case[2]. The complaint alleged that 3 car manufacturers, M/s Honda Siel Cars India Ltd., Volkswagen India Pvt. Ltd. and Fiat India Automobiles Limited, restricted free availability of spare parts in the open market, which caused a denial of market access for independent repairers, in addition to other anti-competitive effects including high prices of spare parts and repair and maintenance services for automobiles.

After a detailed investigation by the Director General (DG) into the practices of 14 car manufacturers (the informant had only complained about 3 car manufacturers), the CCI found that the car manufacturers had contravened the provisions of Sections 3 and 4 of the Act and levied a penalty of 2% of the total turnover in India on each of the manufacturers. As a consequence, some car manufacturers filed a writ before the Delhi HC challenging the constitutional validity of certain provisions of the Act, which directly impacted the validity of the CCI’s final order in Auto Parts case[3].

Key Issues for Determination

The Delhi HC delineated the following key issues for determination: (i) whether the CCI is a tribunal exercising judicial functions; (ii) whether the composition of the CCI is unconstitutional and violates the principle of separation of powers; (iii) whether the “revolving door” practice at the CCI vitiates any provisions of the Act and more specifically, if the manner for decision-making provided under Section 22(3) of the Act is unconstitutional; and (iv) whether an expansion in scope of inquiry by the CCI is illegal.

Ruling on the first issue, the Delhi HC held that the CCI is in part administrative, expert (when discharging advisory and advocacy functions) and quasi-judicial (while issuing final orders, directions and penalties) and cannot be characterised as a tribunal solely discharging judicial powers.

On the second issue, the Delhi HC dealt with each of the provisions of the Act that were challenged by the petitioners and also undertook a comparison of regulatory models of different specialised bodies/tribunals vis-à-vis the CCI. In particular, Section(s) 61 and 53-T of the Act (which deal with exclusion of jurisdiction of civil courts and High Courts, respectively); Section 9 (which provides for the selection procedure/committee for members of the CCI); Section(s) 11, 55 and 56 (which deal with tenure of the members of the CCI and the provision for supersession by the Central Government in the event the CCI is unable to discharge its functions); Section 53-D (which prescribes the composition and constitution of the Appellate Tribunal) were upheld to be valid. Regarding Section 8 of the Act, the Delhi HC clarified that the requirement for the CCI to have a judicial member at all times is mandatory and in line with precedents of the Honourable Supreme Court of India (SC) as well. The Delhi HC declared Section 53-E of the Act (which deals with composition of the Selection Committee of the Appellate Tribunal), to be unconstitutional subject to the decision of the Honourable SC in Central Administrative Tribunal v. Union of India[4] (wherein certain provisions of the Finance Act, 2017 have been challenged).

Most importantly, the Delhi HC declared Section 22(3) of the Act which provides a casting vote (to the Chairperson of the CCI) to be void. It was held that the principle of equal weight for decisions of each participant of a quasi-judicial tribunal is destroyed by this provision. Whereas the proviso to Section 22(3), mandating a minimum quorum of three members (including the Chairman) for any meeting of CCI — where an adjudicatory decision is made — was upheld.

Regarding the “revolving door policy” the Delhi HC emphasised on the principle of “who hears must decide” and stated that any violation of this rule would render any final order void. It was also clarified that much would depend on the factual context and merely resorting to the practice of “revolving door” would not render Section 22 of the Act invalid or arbitrary. It is necessary that the party raising such objections must have been prejudiced.

Further, in line with the decision of the Honourable SC in Excel Crop Care Ltd. v. CCI[5], the Delhi HC held that the CCI is well within its power to expand the scope of inquiry to include other issues and parties. This is because at the prima facie stage, the CCI may not have all information in respect of the parties’ conduct.

Finally, the Delhi HC has directed the CCI to frame guidelines ensuring that the principle of “one who hears decides” is embodied in letter and spirit in its functioning. It concluded that in all cases where final hearings begin, the membership should not vary, and a matter should preferably be heard by 7 or at least, 5 members. The CCI has also been directed to ensure that a judicial member is present and participating at all times during a final hearing. The directions also mandate the Central Government to take expeditious steps and fill all existing vacancies in the CCI within 6 months.

Key Takeaway

While the directions of the Delhi HC will go a long way in entrenching principles of natural justice in the CCI’s practice and procedure, they may have immediate ramifications on its functioning (given that the CCI is currently composed of 3 members with no judicial member). Interestingly, this may also have a bearing on the decision of the Union Cabinet which had approved “right sizing” of the CCI to 4 members (including the Chairperson) in April last year.

Having said that, this may not be the last we hear from the judiciary as the Delhi HC order is likely to be challenged before the Supreme Court of India.


*Bharat Budholia, Partner can be contacted at Bharat.budholia@cyrilshroff.com, Aishwarya Gopalakrishnan, Principal Associate can be contacted at Aishwarya.gopalakrishnan@cyrilshroff.com and Dhruv Rajain, Senior Associate can be contacted at dhruv.rajain@cyrilshroff.com with the Competition Law Practice at Cyril Amarchand Mangaldas.

[1]        Mahindra Electric Mobility Ltd. v. CCI, 2019 SCC OnLine Del 8032.

[2]        Shamsher Kataria v. Honda Siel Cars India Ltd., 2014 SCC OnLine CCI 95.

[3]        Shamsher Kataria v. Honda Siel Cars India Ltd., 2014 SCC OnLine CCI 95.

[4]        WP (C) No. 640 of 2017 (SC).

[5]        (2017) 8 SCC 47.