The Finance Bill, 2017 received Presidential Assent on 31st March 2017 becoming the Finance Act, 2017. The Ministry of Finance notified that the relevant provisions regarding the merger of tribunals would come into force on 26th May 2017.
Accordingly, Sections 2(ba) and 53A of the Competition Act and Section 410 of the Companies Act, 2013 (for short “Companies Act”) have been appropriately amended and various other provisions of the Competition Act dealing with the Competition Appellate Tribunal (for short “COMPAT”) have been omitted. Further, Section 417A has been introduced in the Companies Act and it deals with the qualifications, terms, and conditions of services of the Chairperson and Members of the National Company Law Appellate Tribunal (for short “NCLAT”).
As a result of the above exercise, COMPAT, which until recently was the primary appellate authority for decisions from the Competition Commission of India (for short “CCI”), was merged with NCLAT.
The government has moved amendments to the Finance Bill in order to facilitate the changes, furthermore, the Copyright Board would be dissolved, too, and its functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced and its functions would be taken over by the Airport Appellate Tribunal.
In case of the Employees Provident Fund Appellate Tribunal, its function would be taken over by the Industrial Tribunal. There would be transitional provisions for the tribunals being replaced.
The chairpersons, vice-chairpersons, chairmen, or other members who are currently occupying posts with tribunals to be merged would be entitled to receive up to three months’ pay and allowances for premature termination of their office term. Officers and other authorities of tribunals that will cease to exist after the merger will stand reverted to their parent cadre, either ministries or departments.
Amendments to the Finance Bill, 2017, proposes that the central government may make rules to provide for the qualifications, appointments, term of office, salaries, and allowances, resignation, removal, and other conditions of service for these members. These rules will be applicable to members, including the chairperson, vice-chairpersons, and members, among others, of specified tribunals, appellate tribunals, and other authorities.
The amendments state that the term of office for these people will not exceed five years and that, they will be eligible for reappointment. Further, the age of retirement for these people has been specified, such as 70 years for chairpersons, chairmen or presidents, and 67 years for vice chairpersons, vice-chairmen, vice-presidents, and presiding officers.
To minimize the number of tribunals, the Finance Act, 2017 sought to merge eight tribunals with other tribunals and amended provisions relating to the structuring and reorganization of such tribunals.
The above measures were sought to be taken through a money bill, which is only supposed to contain provisions for imposition of taxes and withdrawal of money from the State Treasury
There will be a transition phase during which all the pending matters before the COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT.
There is also a perceived lack of clarity regarding the manner and the timelines in which these transferred matters will be dealt with by the NCLAT, given that the NCLAT is already burdened with adjudication of appeals arising out of the NCLT. This brings to the fore concerns about whether the administrative machinery of the NCLAT is equipped to deal with the additional authority that has now been assigned to it.
In order to deal with the additional responsibility of adjudicating appeals under the Competition Act, it may be helpful to now increase the number of members of the NCLAT.
The NCLAT may also have multiple Benches, including a dedicated Bench for matters under the Competition Act. Amendments to the Rules, bringing them in tune with the Competition Act would go a long way in easing procedural formalities.
The merger was challenged by a Writ Petition titled as “Madras Bar Association v Union of India & Anr. being Writ Petition (C) No. 15147-15148 of 2017” has been filed in the High Court of Madras by the Madras Bar Association, an association of lawyers which has considerable experience in advocating such causes. The Ministry of Finance and Ministry of Law have been impleaded as Respondents. The primary contentions laid down in the writ petition are as follows:
Section 156 to 189 (the relevant provisions regarding the merger of tribunals) of the Finance Act, 2017 are ultra vires Article 14, Article 50 and Article 110 of the Constitution of India. The Conditions of Service Rules are unconstitutional as they violate the principles of separation of powers and the independence of the judiciary, which form part of the basic structure of the Constitution.
Significantly, the Petitioners also submitted that the impugned provisions of the Finance Act, 2017 and the Conditions of Service Rules are contrary to certain directions issued by the Supreme Court in “Union of India v. R Gandhi, (2010) 11 SCC 1”, when hearing a similar challenge regarding the establishment of the National Company Law Tribunal and the NCLAT.
Further, the Petitioner contended that the passing of the impugned provisions in the Finance Act, 2017 as a money bill constitutes “colourable exercise of power”.
As the institutions enforcing the Competition Act, 2002 face judicial challenges, it will be imperative for the Central Government to ensure that the above judicial challenges are met appropriately so as to further the cause of justice with minimal interference with the on-going functioning of the authorities.
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