Madras Bar Association challenges Constitutionality of Company Law Tribunal; Alleges attempts by Executive to subvert Judiciary

The Madras Bar Association (Petitioner) has filed a writ petition in the Supreme Court challenging the Constitutionality of the provisions of Chapter XXVI of the Companies Act, 2013 (Act) which seeks to create the National Company Law Tribunal (NCLT) and the Appellate Tribunal (NCLAT)..Yesterday, a Division Bench comprising Justices AK Patnaik and Ibrahim Kalifulla issued notice to the Centre after hearing the petitioner’s counsel, Senior Advocate Arvind Datar..The Petitioner has contended that the provisions of the Act “more particularly Sections 408, 409, 411(3), 412, 413, 425, 431 and 434” are ultra vires the provisions of Article 14 of the Constitution on, inter alia, the following grounds:.“[The Sections] are directly in contravention of the judgment of this Hon’ble Court in Union of India vs R. Gandhi, wherein this Hon’ble Court laid down specific guidelines to be complied with by the Parliament when the NCLT and NCLAT are constituted.Chapter XXVII of the Companies Act, 2013, which envisages the setting up of the NCLT and NCLAT makes room for persons within the Executive branch to secure appointment as Members and after their appointment, will continue to retain lien on their substantive post. A Tribunal constituting of such persons cannot be regarded as one which is independent and impartial, and which can discharge State’s inherent judicial powers in the manner in which it should be discharged.That in the present provisions, the qualifications prescribed for members of the proposed Tribunal will easily permit members of the general civil service to become members of the NCLT despite the contrary observation by the Supreme Court that a Technical Member shall be an expert in the field of the Tribunal.Although, under the Act, the President of the Tribunal must be a High Court Judge, at the same time, the vacancy in his office can be filled up by the senior-most member who may not have been a High Court Judge. There is no time limit for filling up the vacancy and a Technical Member can continue as President indefinitely. This has happened in the case of Company Law Board where a High Court judge was not appointed as the Chairperson and the senior-most member continued as Chairman for several years.”.Questioning the composition of the Selection Committee, the petitioner has also challenged the decision of the Legislature to bring the NCLT and NCLAT under the Ministry of Corporate Affairs as opposed to the Ministry of Law and Justice which was the direction in R Gandhi’s case. Contending that there is no other country wherein company law disputes are decided by Tribunals, the Petitioner has alleged that,.“The 2013 Act has once again revealed that the respondent Union is interested in stripping away the powers of the judiciary and make the judiciary subservient to the executive..there is a grave danger that the judiciary will be substituted by a host of quasi judicial tribunals which will function as Departments of various ministries.”.Citing the above grounds the petitioner has prayed for a,.“Writ of Declaration declaring that the provisions of Chapter XXVII of the Companies Act, 2013, more particularly Sections 408, 409, 411(3), 412, 413, 425, 431 and 434 of the Act as ultra vires the provisions of Article 14 of the Constitution and accordingly striking down the said provisions as unconstitutional.”.Additional Solicitor General Nageshwar Rao, appearing for the Centre, said that it would respond within two weeks and that no selection to the Tribunals would be made in meanwhile. The matter is now listed for January 27..Image taken from here