Supreme Court strikes down constitutional validity of National Tax Tribunal Act, 2005 [Read Judgment]

In a landmark judgment likely to have wide ramifications, a Constitution Bench of the Supreme Court today held that the National Tax Tribunal Act, 2005 (NTT Act) is ultra vires the Constitution. The judgment was delivered in a batch of petitions including a petition filed by the Madras Bar Association (Petitioner). The Bench comprised of Chief Justice RM Lodha, Justice JS Khehar, Justice Jasti Chelameswar, Justice AK Sikri and Justice RF Nariman. Justice Nariman delivered a separate concurring judgment..In the majority judgment authored by Justice JS Khehar, the court held that although Constitutional conventions do not debar Parliament from vesting judicial powers in tribunals, it should have the trappings of a court; else it would be violative of the basic structure of the Constitution..“The Parliament has the power to enact legislation, and to vest adjudicatory functions, earlier vested in the High Court, with an alternative court/tribunal. Exercise of such power by the Parliament would not per se violate the basic structure of the Constitution…The basic structure of the Constitution will stand violated, if while enacting legislation pertaining to transfer of judicial power, Parliament does not ensure, that the newly created court/tribunal, conforms with the salient characteristics and standards, of the court sought to be substituted.”.The Court also held that, Company Secretaries are not eligible for representing a party to an appeal before the National Tax Tribunal (NTT)..The Court, therefore, struck down the Constitutionality of the Act on the ground that the NTT does not have the salient characteristics of the courts which it seeks to replace..“Sections 5, 6, 7, 8 and 13 of the NTT Act (to the extent indicated hereinabove), are held to be unconstitutional. Since the aforesaid provisions, constitute the edifice of the NTT Act, and without these provisions the remaining provisions are rendered ineffective and inconsequential, the entire enactment is declared unconstitutional.”.In his concurring judgment, Justice Nariman went the extra mile and said that tribunals cannot decide questions of law and those can only be decided by superior Constitutional courts..Senior Advocate Arvind Datar had appeared for the Petitioner in the matter while Attorney General Mukul Rohatgi had represented the Central government..The Petitioner had challenged the Constitutional validity of National Tax Tribunal Act, 2005 (NTT Act) and Article 323B of the Constitution. The Petitioner’s contention was that Article 323B violates the basic structure of the Constitution by allowing the legislature to take away the jurisdiction of the High Courts and vesting them in tribunals, including the power to adjudicate pure questions of law, which had always been in the exclusive domain of the judiciary..However, Article 323B has not been struck down by the Supreme Court..The Petitioner had also submitted that if Tribunals are created, they must be part of and under the control of the Indian Judiciary and “the process of selection of appointees to the Tribunal must be done as in the case of the High Court judges”. Regarding the NTT Act, the Petitioner had submitted that the effective power of appointment of members of the Tribunal vests with the Executive .“which will be destructive of the impartiality of such a Tribunal…and the Constitutional requirement of an independent judiciary”..On the other hand, Central government through Attorney General Mukul Rohatgi had submitted that tribunals have all the trappings of the courts including independence from the executive. While admitting that the NTT has replaced High Courts even with regard to deciding substantial questions of law, Rohatgi had contended that if tribunalisation is not accepted everything would remain with the courts. .Another petition filed by Madras Bar Association challenging the Constitutionality of National Company Law Tribunal and Appellate Tribunal is also pending before the Supreme Court. .Read the full judgment below.