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National Company Law Tribunal held unconstitutional

Our Bureau

Chennai , April 10

A DIVISION Bench of the Madras High Court has declared the constitution of the National Company Law Tribunal (Tribunal) and the National Company Law Appellate Tribunal (Appellate Tribunal) as provided for under provisions of the Companies (Amendment) Act, 2002 as unconstitutional.

A division bench, comprising Mr Justice R Jayasimha Babu and Mr Justice M. Karpavinayagam ruled that the three-year term of office for members was extremely short and a disincentive for competent people to join.

Professionals could not be expected to give up their practice for a limited term of three years. In its view, the limitation of a three-year term showed that the executive was gradually making deeper and deeper inroads into the independence of the judiciary.

The division bench also identified a few other infirmities in the process of selection of members of the Tribunal and the Appellate Tribunal. It held that the qualifications of judicial and technical members had to be completely recast. As per the amendment, technical members would be persons having 20 years experience in science, technology, economics, banking and in 15 other diverse fields.

The High Court pointed out that the knowledge of science, technology and marketing was no substitute for expertise in the specialised branch of company law.

The chairman of Appellate Tribunal and the president of Tribunal should not be subject to the selection process by a committee of secretaries as provided for in law at present but should be appointed by the Chief Justice of India in consultation with two senior most judges of the Supreme Court.

The stipulation that members who come from the civil services can retain a lien on their jobs indefinitely was also faulted by the division bench as not conducive to proper functioning. In the court's view, the selection of members must be made only after wide publicity in various newspapers.

The selection of members to the Tribunal and the Appellate Tribunals, showed that that there was an aggressive executive tendency to slowly take over the judicial powers exercised by the court, the judges observed.

The court was ruling on a writ petition filed by the Madras Bar Association challenging the formation of these tribunals. By the amended Act, the tribunal was to consist of a president and 62 members and would take over virtually all the powers of the High Courts and the Company Law Board (CLB) relating to company law and the Board of Industrial and Financial Reconstruction (BIFR). It was proposed to constitute 10 benches of tribunals throughout the country. The amendment also provided for formation of a National Company Law Appellate Tribunal presided over by a Supreme Court judge or a retired high court chief justice and two other members.

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