Rojer Mathew v. South Indian Bank Ltd. & Ors. 2019

Case Briefing: Rojer Mathew v. South Indian Bank Ltd. & Ors. 2019

Case Title and Citation

Rojer Mathew v. South Indian Bank Ltd. & Ors. (with connected matters including W.P.(C) No. 267/2012 filed by Madras Bar Association, and W.P.(C) No. 279/2017 filed by Kudrat Sandhu).

Civil Appeal No. 8588 of 2019 [Arising out of Special Leave Petition (Civil) No.15804 of 2017)].

Facts

The matter involved a batch of cases primarily challenging the constitutionality of Part XIV of the Finance Act, 2017.

1. Lead Challenge: The writ petition filed by Kudrat Sandhu specifically challenged the vires of Part XIV of the Finance Act, 2017, which amended provisions across twenty-five different enactments. These amendments effected sweeping changes to the requisite qualifications, methods of appointment, terms of office, salaries, and allowances of the members and presiding officers of various statutory Tribunals.
2. Statutory Purpose: Part XIV aimed to provide for the merger and amalgamation of certain tribunals and harmonize the conditions of service for members through rules framed by the Central Government via Section 184.
3. Procedural Issue: Petitioners contended that Part XIV was illegally included in the Finance Act, 2017, which was passed only by the Lok Sabha as a ‘Money Bill’ under Article 110, thereby circumventing the Rajya Sabha.
4. Rules Challenge: The Central Government subsequently notified the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017 (the Rules), under Section 184. Petitioners argued these Rules violated the independence of the judiciary and precedent set by earlier Supreme Court decisions (e.g., L. Chandra Kumar, R. Gandhi, and Madras Bar Association).

Issue(s)

I. Whether the Finance Act, 2017, insofar as it amends certain enactments and alters conditions of service of Tribunal personnel (Part XIV), can be termed a ‘money bill’ under Article 110 and consequently is validly enacted?

II. If the answer to Issue I is affirmative, whether Section 184 of the Finance Act, 2017, is unconstitutional on account of Excessive Delegation?

III. If Section 184 is valid, whether the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, are in consonance with the parent Act and previous judicial dictates on Tribunal functioning?

Rule of Law

1. Judicial Review of Money Bill Certification: The decision of the Speaker of the Lok Sabha on whether a Bill is a Money Bill (Article 110(3)) is subject to judicial review if challenged on the ground of illegality or unconstitutionality, as distinct from a mere irregularity of procedure.
2. Judicial Independence and Tribunals: The independence of the judiciary is a part of the basic structure of the Constitution. Tribunals that function as substitutes for courts must possess the same independence, security, and capacity as the courts they replace.
3. Selection and Appointment: Judicial dominance in the composition of Search-cum-Selection Committees for adjudicatory posts is imperative to maintain judicial independence and conform to the doctrine of Separation of Powers. The inclusion of technical members or individuals lacking legal/adjudicatory experience to judicial positions constitutes an unacceptable dilution and encroachment upon the independence of the judiciary.
4. Delegation of Legislative Function: Essential legislative functions, such as determining the legislative policy and articulating standards (including qualifications for adjudicatory posts), cannot be delegated, though delegation of subsidiary acts is permissible.
5. Terms of Service: Short tenures (like three years) for Tribunal members are anti-merit and discourage capable candidates, compromising the efficacy of Tribunals. Provisions allowing reappointment undermine independence.

Holding

1. Issue I (Money Bill): The issue regarding the constitutional validity of the Finance Act, 2017 (Part XIV), as a Money Bill under Article 110(1), is referred to a larger Bench [228 (i), 767, 793].
2. Issue II (Delegation): Section 184 of the Finance Act, 2017, does not suffer from excessive delegation, as binding dictates of the Supreme Court provide sufficient guiding principles [228 (ii), 252, 262]. (However, Justice Deepak Gupta dissented on this point, arguing that defining qualifications is an essential legislative function that cannot be delegated).
3. Issue III (Rules Validity): The Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2017, are struck down in their entirety [228 (iii), 458, 757].
4. Interim Direction: Appointments to Tribunals shall, as an interim measure, be made in terms of the respective statutes before the enactment of the Finance Bill, 2017.

Reasoning

The court found the Rules unconstitutional and issued consequential directions based on the violation of established judicial principles:

1. Rules Contravene Judicial Precedent: The Rules failed to conform to the established requirement that judicial independence must be secured in the Tribunal framework.
2. Executive Dominance in Selection: The composition of the Search-cum-Selection Committees lacked judicial dominance, instead allowing appointments of members and presiding officers to be “predominantly made by nominees of the Central Government”. This was held to be against the doctrine of separation of powers, as the Executive (the largest litigant) cannot be a dominant participant in judicial appointments.
3. Dilution of Judicial Character: The prescribed qualifications allowed technical or non-judicial members devoid of adjudicatory experience to be appointed to judicial positions, resulting in an unconstitutional “dilution of the judicial character”. Furthermore, eligibility criteria were vaguely defined, increasing executive discretion.
4. Insufficient Tenure: The mandatory short tenure of three years for members of Tribunals was deemed anti-merit and detrimental to efficiency, discouraging competent individuals (especially practising advocates) from accepting the posts.
5. Compromised Removal Process: The Central Government retained control over the removal process, significantly weakening the independence of Tribunal members, as removal without the concurrence of the Judiciary is unconstitutional.

Systemic Directions (Mandamus)

The court issued a writ of mandamus for the implementation of comprehensive reforms:

• Rules Reform: The Central Government must re-formulate the Rules strictly in conformity with the established principles of judicial independence and the observations made in the judgment, including ensuring uniform conditions of service and assured tenure [228 (iv), 459].
• Judicial Impact Assessment: The Union of India must conduct a Judicial Impact Assessment of all Tribunals established under the Finance Act, 2017, to analyze the impact of changes and determine resource requirements [228 (vii), 386, 387, 461].
• Rationalization/Amalgamation: The Union Government must carry out an exercise for the amalgamation of existing Tribunals based on the homogeneity of subject matter and constitute adequate Benches commensurate with the volume of work [228 (ix), 463].
• Appeals Structure: The Union Government must, in consultation with expert bodies, re-visit statutory provisions that provide direct appeals from Tribunals to the Supreme Court. Appeals should instead be directed to the Division Benches of the High Courts, preferably within six months [228 (viii), 451, 462, 851].
• Nodal Agency/Status: The Court reiterated the need for a single nodal agency for the administration of all Tribunals and held that Tribunal members or presiding officers cannot be equated in ‘rank’ and ‘status’ with sitting judges of Constitutional Courts [228 (vi), 397, 398, 460].