NATIONAL COMPANY LAW TRIBUNAL BAR ASSOCIATION versus UNION OF INDIA on 1 August 2022

NATIONAL COMPANY LAW TRIBUNAL BAR ASSOCIATION

v.

UNION OF INDIA

(Writ Petition (Civil) No. 180 of 2022)

AUGUST 01, 2022

[DR. DHANANJAYA Y CHANDRACHUD AND SUDHANSHU

DHULIA, JJ.]

Companies Act, 2013: s.413 – Appointment of Members –Modification of tenure – On 20 September 2019, Ministry ofCorporate Affairs issued Notification appointing 28 candidates asmembers of NCLT for tenure of three years – NCLT Bar Associationfiled writ petition seeking modification of tenure of appointment ofthe Members of NCLT from three to five years – Plea of petitionerthat the Notification was contrary to provisions of s.413 whichprescribes for a term of five years – The Union government statedthat the appointment of the Members for a period of three yearswas approved by the Appointments Committee of the Cabinet andbefore appointment, the Members were given an offer of appointmentfor three years – Pursuant to the offer, the Members joined theNCLT – Hence, it was urged that the Bar Association can have nolocus to question the term of appointment when the Members havenot raised a grievance – On 29 March 2022, the President of theNCLT addressed a communication to the Union Governmentrecording that the tenure of 23 Members would come to an end inJune-July 2022 and that the resultant vacancies would createdifficulties in the “pan-India functioning” of the NCLT – ThePresident of the NCLT requested that the probable vacancies maybe factored in during the course of the deliberations in the selectionprocess – The meeting of the Selection Committee was convenedand a report was obtained from the President of the NCLT aboutthe “work performance and suitability” of 23 Members – TheSelection Committee then opined that there was no specific provisionwhich empowered it to consider the issue of revising the term ofoffice of the Members of the NCLT – The Committee howeverobserved that considering the sensitive nature of the functions andduties of the Members of the NCLT, and considering the verificationreports bearing on the character, antecedents, performance and

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Asuitability of the Members, the Union government may take“appropriate action in the matter” – Pursuant to the above process,a notification was issued on 14 June 2022 by the Union governmentby which approval was granted for revising the tenure of two JudicialMembers and six Technical Members for a period of five years ortill they attain the age of 65 in consonance with the provisions ofBs.413 of the Act 2013 – Selection Committee initiated the process ofselection – The vacancies which are being processed for selectioninclude those arising upon the end of the three-year term of themembers who were appointed on 20 September 2019 – The grant ofany relief would interfere with the ongoing selection process – PleaCof petitioner that the Notification was contrary to provisions of s.413which prescribes for a term of five years cannot be accepted aspetition was filed by those who are not the members of the NCLT –The prayer for extension was asked at a belated stage when thetenure of the Members was nearing its end – Not only had theMembers consciously accepted the post for a duration of three years,Dthe Selection Committee also already directed the government totake appropriate action on basis the performance report –Accordingly, Union Government had issued the notification dated14 June 2020 extending the tenure of two judicial and six technicalmembers – Furthermore, in the present circumstances, the selectionEprocess for fresh appointments of Members of the NCLT has alreadybegun and is partially at an advanced stage – Hence, no interferencewarranted – Directions issued to make the further appointments inaccordance with the provisions u/s.413 of the Companies Act.

Disposing of the Petition, the CourtF

Conclusion

Disposing of the Petition, the CourtF

HELD: 1. These proceedings under Article 32 of theConstitution have been instituted by the National Company LawTribunal Bar Association against the Union government in theMinistry of Corporate Affairs. The petitioner contends that thenotification dated 20 September 2019 issued by the Ministry ofGCorporate Affairs appointing 28 candidates as Members of theNational Company Law Tribunal for a tenure of three years iscontrary to the provisions of Section 413 of the Companies Act2013. Pursuant to the above process, a notification was issuedon 14 June 2022 by the Union government in the Ministry of H

Corporate Affairs by which approval was granted for revising thetenure of two Judicial Members and six Technical Members fora period of five years or till they attain the age of 65 in consonancewith the provisions of Section 413 of the Companies Act 2013.[Paras 1, 2, 12][1124-C-D; 1127-A-D]

2. In the present case, there is no challenge to the Rulesor the provisions of the statute itself. The petitioners have insteadsought an extension of the tenure of the retiring Members, whoare not petitioning parties to the proceedings before this Court.The prayer for extension is also at a belated stage when the tenureof the Members is nearing its end. Not only had the Membersconsciously accepted the post for duration of three years, theSelection Committee also already directed the government totake appropriate action basis the performance report. The UnionGovernment has accordingly issued the notification dated 14 June2020 extending the tenure of two judicial and six technicalmembers. Furthermore, in the present circumstances, theselection process for fresh appointments of Members of theNCLT has already begun and is partially at an advanced stage.Accordingly, this Court’s orders at the present stage wouldinterfere with the selection process. Hence, the appropriatecourse of action to be followed in the present case would be toallow the selection process which has been initiated to continueso that it can be concluded at an early date. The interest of theBar Association which has moved these proceedings is that thevacancies in the Tribunal should be filled in on an expeditiousbasis so that work does not suffer and the functioning of theTribunal is not hampered. The Bar Association cannot have achoice in regard to who should be a Member of the Tribunal.However, this Court directed that in making appointments tothe NCLT in the future, the Union Government shall be boundby the statutory provisions embodied in Section 413 of theCompanies Act 2013. [Paras 24, 26, 27][1130-E-G; 1131-C-D]

CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.180 of 2022.

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ADr. V. K. Chaudhary, Sanjeev Sen, Sr. Advs., Saurabh Kalia, SikhilSuri, Manusmyer Singh, Sameer Chaudhary, Ms. Manisha Chaudhary,S. Swarup, Ms. Supriya Juneja, Advs. for the Petitioner.

Balbir Singh, ASG, Ankur Talwar, Rajat Nair, Ms. ChinmayeeChandra, Rajan Kr. Chourasia, Arvind Kumar Sharma, Kumar AnuragBSingh, Anando Mukherjee, Ms. Tulika Mukherjee, Zain A. Khan,Ms. Ekta Bharati, Pawanshree Agrawal, Shaubhik Gupta, Advs. for theRespondent.

The Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, J.C

1. These proceedings under Article 32 of the Constitution havebeen instituted by the National Company Law Tribunal Bar Associationagainst the Union government in the Ministry of Corporate Affairs.

2. The petitioner contends that the notification S.O. 3412 (E) datedD20 September 2019[1] issued by the Ministry of Corporate Affairs appointing28 candidates as Members of the National Company Law Tribunal[2] fora tenure of three years is contrary to the provisions of Section 413 of theCompanies Act 2013. Sub-section (1) of Section 413 of the CompaniesAct 2013 stipulates that:

“413 Term of office of President, Chairperson and otherEMembers.- (1) The President and every other Member of theTribunal shall hold office as such for a term of five years from thedate on which he enters upon his office, but shall be eligible forre-appointment for another term of five years.”

Reliance is also placed on the decisions of this Court in MadrasFBar Association v. Union of India,[3]Madras Bar Association v. Unionof India,[4]and Rojer Mathew v. South Indian Bank Limited.[5]

3. According to the petitioner, the advertisements issued by theUnion government inviting applications for appointment of Judicial andTechnical Members of the NCLT prescribed a tenure of five years.GHowever, the impugned notification which was issued on 20 September 1 “impugned notification”

2 “NCLT”

3 (2021) SCC Online SC 463; “Madras Bar Association (2021)”

4 2021 (7) SCC 369; “Madras Bar Association (2020)”

H5 2018 (16) SCC 341

2019, prescribed a tenure of three years or until the attainment of age of65 years, whichever is earlier.

4. The petitioner urges that on the other hand, on 28 July 2016, 11September 2021 and 10 October 2021, notifications were issued by theUnion government for the appointment of members of NCLT, each for aterm of five years or until the attainment of age of 65 years, which isearlier, in line with the provisions of Section 413 of the Companies Act2013.

5. In essence, therefore the submission which has been urged onbehalf of the petitioner is that the impugned notification prescribing atenure of three years is contrary to the provisions of Section 413(1) ofthe Companies Act 2013. The petitioner therefore seeks a modificationof the tenure of appointment of the Members of the NCLT from threeyears to five years by correcting the notification of appointment.

6. Notice was issued in these proceedings on 5 April 2020.

7. On 20 June 2022, the petition came up before a Bench of thisCourt when the following order was passed:

“After hearing learned senior counsel appearing for the petitionerand learned Solicitor General of India, we are of the consideredview that inter alia, two issues call for consideration in this matter.

Firstly, it is with respect to the question of locus standi of thepetitioner Bar Association to challenge the Notification dated20.09.2019 whereby 23 persons were appointed, which is nowraised by the respondent. The second issue is with respect to theright of the appointees to continue in the post beyond the term ofappointment when they, without any demur, accepted it in theyear 2019 and till date did not raise any challenge against restrictionof period of appointment of three years. The petitioner Associationwould contend that if the matter is not taken up and interim order(s)is not passed, at least some of the appointees would have to demitoffice owing to the expiry of the period of appointment.

Taking into account the fact that none of the appointees under theimpugned Notification so far challenged the same and accepted itwith open eyes, no interim order can be passed now. We are ofthe view that matter relating their right to continue beyond theperiod of three years on the strength of the aforesaid notification A

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1126SUPREME COURT REPORTS

Acan also be considered in the Writ Petition itself, provided theissue of locus standi is answered in favour of the petitioner.

List the matter before the appropriate Bench on 20th July, 2022.”8. The Union government has filed an affidavit in these proceedings seeking to explain its position on the matter.B

9. A preliminary objection has been raised to the maintainability ofthe petition. The Union government has stated that the appointment ofthe Members of the NCLT for a period of three years was approved bythe Appointments Committee of the Cabinet and before appointment,the Members were given an offer of appointment for three years.CPursuant to the offer, the Members joined the NCLT in pursuance of theimpugned notification. Hence, it has been urged that the Bar Associationcan have no locus to question the term of appointment when the Membershave not raised a grievance.

10. A Selection Committee was constituted for the selection ofDMembers of the NCLT. The Selection Committee was chaired by theChief Justice of India. On 29 March 2022, the President of the NCLTaddressed a communication to the Union Government recording that thetenure of 23 Members would come to an end in June – July 2022 andthat the resultant vacancies would create difficulties in the “pan-IndiaEfunctioning” of the NCLT. The President of the NCLT requested thatthe probable vacancies may be factored in during the course of thedeliberations in the selection process. The meeting of the SelectionCommittee was convened on 20 April 2022. The minutes pertaining toAgenda Item No 2 are extracted below:

F“Agenda Item No. 2

D.O. letter No. 1/1/2022-NCLT addressed by the President ofthe National Company Law Tribunal (NCLT) to the Secretary,Ministry of Corporate Affairs was placed before the SelectionCommittee in terms of the request made by him. The Presidentof NCLT in the said letter has pointed out that 3 year fixed tenureGof 23 Judicial and Technical Members of NCLT would be expiringin June/July 2022 by efflux of time and the resultant probablevacancies would create hardship in the working of Benches ofNCLT all over the country. The latest character and antecedentsverification reports of said 23 Members were also placed beforeHthe Committee by the Convener.”

The Selection Committee convened again on 6 June 2022. AgendaItem No 2 pertained to the continuation of 23 Members of theNCLT whose three year term was to come to an end. The minutespertaining to Agenda Item No 2 are extracted below:

“AgendaItemNo.2

In pursuant to the resolution of last meeting of the Committeeheld on 20th April, 2022, Secretary, Ministry of Corporate Affairsobtained a report from President, NCLT about work performanceand suitability of 23 Members and placed it before the Committeeduring the meeting. Considering all aspects of the matter, theCommittee observed that there is no express provision in the rules,which empowers the Committee to consider the issue of revisionof the term of office of Members, NCLT.”

11. From the above narration, it appears that following the meetingof the Selection Committee on 20 April 2022, a report was obtainedfrom the President of the NCLT about the “work performance andsuitability” of 23 Members. The Selection Committee then opined thatthere was no specific provision which empowered it to consider theissue of revising the term of office of the Members of the NCLT. TheCommittee however observed that considering the sensitive nature ofthe functions and duties of the Members of the NCLT, and consideringthe verification reports bearing on the character, antecedents,performance and suitability of the Members, the Union government maytake “appropriate action in the matter”.

12. Pursuant to the above process, a notification was issued on 14June 2022 by the Union government in the Ministry of Corporate Affairsby which approval was granted for revising the tenure of two JudicialMembers and six Technical Members for a period of five years or tillthey attain the age of 65 in consonance with the provisions of Section413 of the Companies Act 2013.

13. During the course of the hearing, this Court has been apprisedby Mr Balbir Singh, Additional Solicitor General appearing on behalf ofthe Union government that for the purpose of filling up 30 vacancies inthe NCLT, the Selection Committee held a personal interaction withshort listed candidates on 20, 21 and 22 June 2022 and has made itsrecommendations in respect of 15 vacancies. The Additional SolicitorGeneral stated that the process is expected to be completed and ordersof appointment would be issued in four to six weeks.

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A14. As regards the second tranche of 15 vacancies, the SelectionCommittee chaired by a Judge of the Supreme Court has directed thatan advertisement be issued for filling up the vacancies. The last date forsubmitting applications is 12 August 2022. The above vacancies wouldinclude the vacancies which have arisen as a result of the expiry of thethree-year term of the Members who were appointed pursuant to theBimpugned notification. As a matter of fact, it has been stated by theAdditional Solicitor General that some of the Members who wereappointed in pursuance of the impugned notification have applied forselection and their candidatures would also fall for consideration.

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15. Section 413(1) of the Companies Act 2013 stipulates that theCterm of a Member of the Tribunal shall be five years from the date onwhich he enters upon office. A Member is eligible for reappointment foranother term of five years. For a Member of the NCLT, the upper agelimit for holding office is prescribed as 65 years by sub-section 2(b) ofSection 413.D16. The petitioner seeks the issuance of a writ by this Court forthe modification of the term of appointment of the 23 Members governedby the impugned notification, whose terms were expiring in June/July2022, from three years to five years.

17. Appointment of persons as members of the NCLT for a periodEof three years is not contemplated by the provisions of Section 413(1).An administrative notification for appointment has to be consistent withthe statute which governs appointments to the Tribunal.

18. The issue, however, which needs to be considered at this stageis whether this Court should in the exercise of its jurisdiction under ArticleF32 of the Constitution entertain a petition filed by the Bar Associationand direct the extension of tenures, especially in view of the superveningdevelopments which have taken place in the meantime.

19. Two facets of the supervening developments need to berecapitulated. First, the Selection Committee constituted for theGappointment of Members of the NCLT has initiated the process ofselection. The vacancies which are being processed for selection includethose arising upon the end of the three-year term of the members whowere appointed on 20 September 2019. In respect of one tranche of 15Members, as the Court was apprised, the process of selection has beenconcluded by the Selection Committee and recommendations have beenH

made. The appointment process shall be concluded within a period offour to six weeks. For the second tranche of 15 vacancies, a notificationinviting applications has already been issued with 12 August 2022 beingthe last date for application. In this backdrop, the grant of any reliefwould interfere with the ongoing selection process.

20. That apart, it is evident that when the incongruity in the termof office of three years was drawn to the attention to the SelectionCommittee chaired by the Chief Justice of India, a report was calledfrom the President of the NCLT on the “work performance and suitability”of the Members. After the initial meeting of 20 April 2022, the SelectionCommittee at its meeting on 6 June 2022 adverted to the sensitive natureof the functions and duties of the Members, the verification carried outwith regard to character and antecedents and the report on performanceand suitability. The Union Government was, therefore, directed to takeappropriate action. It is in pursuance of these minutes that the UnionGovernment has issued a notification dated 14 June 2022 extending thetenure of two judicial and six technical members for a period of fiveyears or until they attain the age of sixty-five.

21. The submission which has been urged on behalf of the petitioneris that Section 417 of the Companies Act 2013 provides a procedure forthe removal of Members and, if any of the Members who were appointedon 20 September 2019 are unfit for continuance, the procedure for removalshould be adopted.

22. Such an argument cannot be acceded to at the request of theBar Association when the Members themselves have not moved thisCourt. Entertaining such a plea is fraught with consequences for themembers whose term has not been extended. Some have applied afreshin the selection process which is under way. Moreover, the Court is notdealing with a situation of removal, but one in which the term of officeas per the impugned notification dated 20 September 2019 has come toan end. The issue in regard to the term of appointment being less thanthe term prescribed statutorily has only been raised towards the tail endof the tenure and by the Bar Association and not the Members themselves.Entertaining the submissions of the petitioner would incidentally lead theCourt into an evaluation of the suitability, character and performance ofindividual Members in a petition to which they are not parties. Such anexercise would, in the circumstances, be wholly inappropriate.

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A23. In Madras Bar Association (2020) (supra), the challengewas to the constitutional validity of the Tribunal, Appellate Tribunal andother Authorities (Qualification, Experience and Other Conditions ofService of Members) Rules, 2020, which mandated that the Membersbe appointed to the Tribunals for a maximum four- year term or untilthey attain 65 years of age, whichever is earlier. Similarly, in MadrasBBar Association (2021) (supra), the challenge was to Sections 12 and13 of the Tribunal Reforms (Rationalisation and Conditions of Service)Ordinance, 2021 and the amended Sections 184 and 186(2) of the FinanceAct, 2017, which provided for a four- year term to the concerned Tribunal,with a maximum age of 70 years for the Chairperson and 67 years forCthe Members. Rojer Mathew (supra) dealt with the provisions of theSchedule to the Tribunals Rules 2017 which had a shorter tenure ofthree years. In all these cases, the Court reiterated its position, as it hadalso held earlier in Union of India v. R. Gandhi,[6]that Rules whichprescribe a short tenure, coupled with provisions of routine suspensionspending enquiry and lack of immunity adversely impact the impartialityDof the Tribunals. Furthermore, shorter tenures in such Rules also precludethe cultivation of adjudicatory experience.

24. In the present case, there is no challenge to the Rules or theprovisions of the statute itself. The petitioners have instead sought anextension of the tenure of the retiring Members, who are not petitioningEparties to the proceedings before this Court. The prayer for extension isalso at a belated stage when the tenure of the Members is nearing itsend. Not only had the Members consciously accepted the post for aduration of three years, the Selection Committee also already directedthe government to take appropriate action basis the performance report.FThe Union Government has accordingly issued the notification dated 14June 2020 extending the tenure of two judicial and six technical members.Furthermore, in the present circumstances, the selection process forfresh appointments of Members of the NCLT has already begun and ispartially at an advanced stage. Accordingly, this Court’s orders at thepresent stage would interfere with the selection process.G

25. While the Notification dated 20 September 2019 prescribinga three year term was not in consonance with Section 413 of theCompanies’ Act 2013, we note that:

H6 (2010) 11 SCC 1

(i) the Members appointed under the notification failed to raise achallenge;

(ii) a fresh process of selection has begun and some of themembers have applied afresh; and

(iii) the Union Government has taken corrective action to extendthe tenure of certain members after considering the report of the Presidentof the NCLT on their performance and suitability.

26. In the above backdrop, the appropriate course of action to befollowed in the present case would be to allow the selection processwhich has been initiated to continue so that it can be concluded at anearly date. The interest of the Bar Association which has moved theseproceedings is that the vacancies in the Tribunal should be filled in on anexpeditious basis so that work does not suffer and the functioning of theTribunal is not hampered. The Bar Association cannot have a choice inregard to who should be a Member of the Tribunal.

27. We however direct that in making appointments to the NCLTin the future, the Union Government shall be bound by the statutoryprovisions embodied in Section 413 of the Companies Act 2013.

28. For the reasons which we have indicated above, we are notacceding to the prayer of the petitioner for the extension of the tenuresof all the 23 persons who were appointed on 20 September 2019 fromthree years to five years, subject to the age cap of 65 years. This will,however, not affect the notification that was issued by the Uniongovernment on 14 June 2022 extending the tenure of eight Members fora period of five years or till they attain the age of sixty-five years,whichever is earlier.

29. The Petition is accordingly disposed of.

30. Counsel for the applicant in IA No 97722 of 2022 (forintervention) seeks permission of the Court to withdraw the InterlocutoryApplication. The Interlocutory Application is dismissed as withdrawn.

31. Pending applications, if any, including the intervention/impleadment applications, stand disposed of.

Devika Gujral

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