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Five Months Without Regular Heads For NCLAT & NCLT

Ragini Agarwal
13 Aug 2020 5:28 AM GMT
Five Months Without Regular Heads For NCLAT & NCLT
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On August 14, 2020, National Company Law Appellate Tribunal ("NCLAT") is completing five months since its former Chairman Justice Sudhanshu Jyoti Mukhopadhaya retired at 70 years of age, in accordance with §413, Companies Act 2013. The Centre appointed Justice (Retd.) Bansi Lal Bhat, Member (Judicial) as officiating Chairperson with effect from March 15, 2020. This appointment was supposed to last for a period of three months or until further orders or until a regular Chairperson was appointed, whichever came earlier. However, on June 15, 2020 this appointment was further extended on similar conditions as the previous notification.

This appointment is under challenge through a Writ Petition Fozia Rahman v. Union of India [W.P.(C) 3536/2020] before the Delhi High Court for not complying with §415 of the Companies Act, 2013 read with Rule 10(1) of the Tribunal, Appellate Tribunal, and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020 ("Tribunal Rules, 2020"). The ground for the petition is that the Centre did not appoint the "senior-most member" as the Acting or Officiating Chairperson. The Petition read:

"Whereas Justice (Retd.) Shri Bansi Lal Bhat was appointed as Judicial Member on 17.10.2017, Hon'ble Mr. Balvinder Singh, Member (Technical) was appointed on 01.07.2016 and Hon'ble Mr. Justice A.I.S. Cheema, Member (Judicial) was appointed on 11.09.2017 and are both members holding greater seniority."

The Delhi High Court has issued notices [Read here, here and here] in the matter and having given time to the Respondents to file Reply, the next date of hearing is scheduled for August 28, 2020. The easiest way to end this uncomfortable litigation is to appoint a full time Chairperson. The requirement of immediate filling the post not being fulfilled, even after initiation of such a level of litigation, suggests that the Central Government is still looking for a suitable candidate who is retiring from the Supreme Court or from some High Courts.

The Tribunal Rules, 2020 were notified in pursuance of §184 of Finance Act, 2017. The NCLAT constituted under Chapter XXVII, §410 of the Companies Act, 2013 has wide powers. It is eligible to hear appeals in matters under the Companies Act, 2013 from the National Company Law Tribunal ("NCLT") (§421); under Insolvency and Bankruptcy Code, 2016 from the NCLT (§61) and the Insolvency and Bankruptcy Board of India (§202 and §211). Since the amendment through Finance Act, 2017, it has also acted as the appellate authority to hear appeals from Competition Commission of India under §53A of the Competition Act, 2002, having replaced Competition Appellate Tribunal.

In Roger Mathew v. South India Bank Ltd. (2019) the Supreme Court had noted that the judicial appointments must be free from the influence of the executive so that the constitutional spirit of independence of the judiciary could be maintained (¶157). Accordingly, the Tribunal Rules, 2020 took into account these factors and prescribed in Rules 3 and 4 that the eligibility conditions and the method of appointment of the Chairperson of Tribunals respectively, would be in the manner provided in the Schedule. Entry 13 in the Schedule provides that for the NCLAT:

"The Chairperson shall be a person who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court."

"Search-Cum-Selection Committee for the post of Chairperson Judicial Member and Technical Member [comprises] - (i) Chief Justice of India or any Judge of the Supreme Court nominated by him -chairperson; (ii) (a) in case of appointment of Chairperson, the Outgoing Chairperson of the National Company Law Appellate Tribunal – member."

It may be noted that in the past 3 years (since 2017), 16 judges of the Supreme Court have retired. Similarly, a number of Chief Justices of the High Courts are also available for appointment as Chairperson. Surprisingly, however, for the post-retirement appointment of Chairperson of NCLAT, no information about a Search-cum-Selection Committee or a shortlist of candidates has been circulated in the public domain. Incidentally, the NCLT has also been suffering a similar fate with Acting President's term being continually extended.

Since a lot of controversy exists as to the 'post retirement appointment' of Judges, highlighted by none than the late Law Minister and Senior Advocate Arun Jaitley, there needs to be a transparent method of appointment. A fair procedure for selection of the candidates and appointment is necessary to dispel the popular allegation that such appointments are given away by the political executive to their preferred personalities.

Since NCLT and NCLAT discharge a large amount of judicial functions, and the appeals from NCLAT lie to the Supreme Court directly, independence of the judiciary can be secured only if the selected candidates have impeccable integrity, with a history of discharging judicial functions without any fear or favour.

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