Guest Post: On the (Un)Constitutionlity of the Competition Commission – A Response

Tags

separation of powers, tribunals

[This is a guest post by Rajat Maloo.]

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It has been previously argued on this forum (here and here) that the Competition Commission of India (CCI), in its current form is unconstitutional. The argument hinged on the contention that the CCI is a body with majorly judicial characteristics and functions apart from a few advisory and administrative functions. Thus, the composition and selection of members of the CCI, which is executive-dominant is unconstitutional as it violates the principle of separation of powers. Based on this, the previous posts criticise the Delhi HC’s judgement by arguing that CCI is a judicial body and it should not be characterised as an administrative body. In this piece, I argue that the CCI is in fact a regulatory body possessing a wide range of powers to facilitate its functioning, including inquisitorial, investigatory, administrative, advisory and judicial powers. I contend that first, the CCI is not a judicial body as it does not adjudicate disputes between parties; and second, judicial powers, if any, of the CCI are limited. While making my own case, I wish to respond to some of the arguments made in the previous posts, albeit, I do not analyse/support the Delhi HC’s judgement in detail.

The CCI is not a Judicial Body

The question of independence of judiciary and separation of powers in judicial tribunals is not a new one. The Supreme Court of India (SC) through numerous decisions over the years, including the recent decision in Rojer Mathew, has established that any tribunal performing judicial functions by replacing a court of law must be judicially dominant. This means that majority of members as well as majority of the selection committee of such members must be from the judiciary to ensure independence of judiciary and separation of powers. However, regulatory agencies, not just in India but also in other jurisdictions such as the US, are placed on a different footing as compared with tribunals performing judicial functions. This is because the powers and functions possessed by regulatory agencies are quite different from a judicial or quasi-judicial tribunal. In this part, I will respond to the argument that CCI is judicial in nature.

In brief, the CCI performs four major functions under the Competition Act, 2002–

1. Ex-post regulation of anti-competitive agreements – Section 3
2. Ex-post regulation of abuse of dominant position – Section 4
3. Ex-ante regulation of combinations – Sections 5 and 6
4. Competition advocacy and advisory functions – Section 49

Now, it is clear that powers under Section 49 are not judicial in nature. Hence, I shall focus on the CCI’s functions under Sections 3, 4, 5 and 6 of the Act.

Relying on the Cooper v. Wilson test, a judicial decision, in the very first place, presupposes a dispute between parties. However, the CCI’s functions do not include resolving or adjudicating disputes between parties. Under Sections 3 and 4, the CCI’s function is majorly investigatory and then punitive if there is a finding of contravention (Sections 27). Further, the ‘informant’ under Section 19 of the Act is not a party to the dispute before the CCI. The informant is merely a source of information for the CCI, upon which it may or may not conduct or order an enquiry. In fact, under Section 19 of the Act, the CCI can suo motu take up an enquiry or may initiate an enquiry on information provided by the Central or the State Governments. Any person or Government, merely by informing the CCI does not become a party to the dispute. This is also evident from the fact that any decision of the CCI is not in favour of or against any party as such. The CCI may go much beyond the information provided by the informant while inquiring into a matter and possesses wide inquisitorial powers. Thus, the very first rung of the test is not met as there is no adjudication of disputes between parties.

Moreover, any disputing party has a right to approach a Court of law or tribunal for adjudication of the dispute – be it of civil or criminal nature. The Court or tribunal is then expected to listen to both the parties, frame issues, assess evidence and pronounce a decision. A Court cannot in the very first hearing simply refuse to adjudicate upon a dispute merely on the basis that the petitioner is not able to make a prima facie case. However, the CCI has the power to not enquire into an information brought to it by an informant.

In fact, the legislature has very consciously not provided the CCI the power to adjudicate disputes – one such instance is awarding compensation to any informant. Such a matter entails or presupposes a dispute between two parties which is very well left for the Appellate Tribunal (judicially-dominant) to determine under Section 53N of the Act. Thus, the CCI does not adjudicate disputes between parties and the legislature has not required the CCI to do so.

In the alternative, even on the assumption that the CCI adjudicates disputes, the Cooper Test also requires that the parties to a dispute must be given a chance to put forth their case. However, according to the SC, an ‘informant’ is not even entitled to a hearing in case the CCI chooses not to go ahead with the enquiry (CCI v SAIL). This means that the CCI can reject the information provided by the informant for enquiry, without even giving the informant an opportunity of being heard. Thus, the legislature as well as the judiciary has not envisaged the CCI as a body to resolve or adjudicate disputes between parties.

Admittedly, the CCI has been given the powers under Section 27 of the Act to impose penalties on persons or enterprises found to be in violation of Sections 3 and 4. However, mere imposition of monetary penalties, based on an enquiry, does not suffice to characterise the body as a judicial body. Purely executive and other regulatory bodies such as the SEBI etc., have the power to impose penalties, which do not make them a judicial body. Moreover, any penalty imposed by the CCI is appealable to the Appellate Tribunal under Section 53A of the Act. Thus, mere power to impose penalties does not give the CCI a completely judicial characteristic.

Now, with regard to ex-ante combination review functions performed by the CCI – once again, it does not entail adjudication of a dispute. At least some form of adjudication of dispute is the very essential requirement for a body to be characterised as a judicial body. However, under Sections 5 and 6, the CCI only preforms regulatory functions to approve or reject potential combinations. In regulating combinations, there is no dispute as such which the CCI has to determine or no parties which come before the CCI for adjudication of a dispute. Merely by giving parties a notice or providing the combining parties an opportunity of hearing does not mean that the CCI is adjudicating a dispute.

Thus, the CCI does not adjudicate disputes and if at all, performs limited number of judicial functions which cannot suffice to characterise it as a completely judicial body.

Limited Judicial Nature

I will now argue that just because the CCI has the power to grant interim orders or other such orders provide it with only certain limited judicial powers and yet again, it does not mean that the CCI is majorly performing judicial functions. Essentially, the judicial powers of the CCI are quite limited and are not enough to give it the authority to function like a full-fledged judicial or quasi-judicial tribunal. For this, the whole functioning of the CCI will have to be examined. The previous post effectively summarises the procedure of enquiry conducted by the CCI regarding the Sections 3 and 4 matters:-

“…the procedure adopted by the CCI in conducting the inquiry under Section 19 is to be examined. The procedure is provided for under Section 26 of the Act. According to the said provision, upon receipt of information or reference, the CCI is required to form an opinion as to the existence of a prima facie case of contravention of the provisions of the Act. If it finds a prima facie case of contravention of the Act, it is required to direct the Director General to investigate the matter. If it finds no prima facie case of contravention of the provisions of the Act from the information provided, it is required to pass an order to that effect and close the matter. It is also required to send a copy of the order to the parties concerned.”

 

This initial procedure, not just the form but also the substance, is ma inquisitorial rather than judicial. As soon as the CCI receives information, it may order the Director General (DG) to enquire. On the basis of the findings of the enquiry, the CCI gives the Opposite Parties as well as the informant a chance to submit their arguments. However, it is to be noted that the case against an Opposite Party is not made by the informant (as should happen in any adversarial judicial proceeding which entails determination of a dispute) but through the enquiry conducted by the DG. This takes away the judicial nature of a court or a tribunal and indicates that the CCI is more of an inquisitorial body.

The CCI is also provided with a set of factors, on the analysis of which, it is required to come to its decision. Sections 19 and 20 use the word ‘shall’ before laying down the limited factors to determine violations under Section 3 or 4 or factors to regulate combinations. This indicates that the CCI is mandated to give due regard to these factors and must function within them. Such limitation on the scope of the CCI clearly show that it is expected to act as a regulatory body with only a few judicial powers.

In this regard, it is also notable that the CCI is established as a body corporate as per Section 7(2) of the Act. Unlike any Court of law or any judicial tribunal (such as the NCLT, for example), the CCI can be made a party to an appeal. The CCI will also have to defend its own decision on appeal before the Appellate Tribunal, any High Court or the SC. This position of law has also been crystallised by SC in CCI v SAIL wherein it was held that the CCI must be a necessary or proper party in appeals. This is vastly different from any Court of law, such as a Civil Court of first instance or a Criminal Court, or any tribunal. Although, judicial bodies may get their authority from statutes, they cannot be made a party or be required to defend their own decisions upon appeal. This shows that the legislature while establishing the CCI through the Act, has been very clear about the limited extent of judicial powers which the CCI can exercise. Having such limited powers, it cannot be said that the CCI is replacing a traditional court in any manner.

Hence, although it was argued by Dev that the CCI under Sections 27, 28 and 31 possesses enforcement powers, the overall functioning of the CCI is largely different from any judicial or quasi-judicial body.

Now, it may be argued that Section 61 of the Act excludes jurisdictions of civil courts and hence, the CCI replaces a Civil Court – which requires the dominance of judiciary in the selection process. However, I submit that this does not necessitate the CCI to be judicially-dominant body because although Section 61 requires that matters relating to antitrust and competition must be submitted before the CCI, but as argued above, the CCI does not replicate a Civil Court in terms of its powers and functions.

Hence, I submit that the CCI does not adjudicate disputes and has very limited judicial powers which are vastly different from a traditional Civil Court or any judicial or quasi-judicial tribunal for that matter. In such a case, the CCI in its current form is not unconstitutional even if its selection committee is not judiciary-dominant as it is not replacing any Civil Court as such. In any case, the CCI’s decisions which affect any person or enterprise adversely are appealable to a judicial body – the Appellate Tribunal.

Guest Post: On the (Un)Constitutionality of Competition Commission – II

Tags

competition commission, separation of powers, tribunals

[This is a two-part series by Rahul Dev.]

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I submit that the characterization of the CCI as an administrative body is incorrect. It is to be considered a judicial body which performs the function akin to those performed by courts. Once it is considered a judicial body, it can be said that it requires the same independence from the executive as enjoyed by courts of law.

The primary objective of the CCI is to ensure competition in markets, by enforcing the provisions of the Act. To that end, its objective is to ensure that the provisions of the Act are not contravened. The only powers provided to the CCI to enforce the provisions of the Act are provided under Sections 27, 28 and 31 of the Act. These sections empower the Commission to pass orders and issue directions to entities found to be engaging in anti-competitive behaviour. The CCI is also empowered to issue interim orders during an inquiry under Section 33 of the Act.

The CCI does not have any legislative or executive powers to ensure compliance with provisions of the Act and prevent anti-competitive behaviour. It cannot pass orders or issue directions in rem which are binding on the public at large or have any statutory force. It does perform an advisory function under Section 49 of the Act. However in its performance of the advisory function it does not have the power to enforce provisions of the Act. This is clarified by the provision itself which states that the advice of the CCI shall not be binding on the Government in formulating a policy.

An examination of the nature of functions performed by the CCI under Sections 27, 28 and 31 is to be made in order to determine the nature of the function performed in enforcing the provisions of the Act. For without the powers provided under these sections, the CCI would be devoid of any power to enforce the provisions of the Act. Therefore the nature of these powers would determine the nature of the primary functions performed by the CCI.

On the face of it, the powers provided to the CCI by the aforesaid provisions are judicial. They relate to the power to pass orders and issue directions against parties. A test to determine whether a decision is a judicial decision or a quasi-judicial decision was laid down by the King’s Bench of the High Court in England in Cooper v. Wilson, (1937)2 K.B. 307. The test has been followed by the Supreme Court of India in a number of decisions, some of which were in fact cited before the Delhi High Court. The Test states:

A true judicial decision presupposes an existing dispute between two or more parties, and then involves four requisites :- (1) The presentation (not necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertainment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal argument by the parties, and (4) a decision which disposes of the whole matter by a finding upon the facts in dispute and application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law. A quasi-judicial decision equally presupposes an existing dispute between two or more parties and involves (1) and (2), but does not necessarily involve (3) and never involves (4). The place of (4) is in fact taken by administrative action, the character of which is determined by the Minister’s free choice.

 

Examination of Nature of Decision under Section 27

In order to apply this test to the function of the CCI under Section 27, the procedure adopted by the CCI in conducting the inquiry under Section 19 is to be examined. The procedure is provided for under Section 26 of the Act. According to the said provision, upon receipt of information or reference, the CCI is required to form an opinion as to the existence of a prima facie case of contravention of the provisions of the Act. If it finds a prima facie case of contravention of the Act, it is required to direct the Director General to investigate the matter. If it finds no prima facie case of contravention of the provisions of the Act from the information provided, it is required to pass an order to that effect and close the matter. It is also required to send a copy of the order to the parties concerned.

A reading of the regulations governing the contents of information to be filed before the CCI (Regulation 10 of the CCI (General) Regulations 2009), reveals that the information is to contain detailed facts, allegations of contraventions of provisions of the Act along with supporting evidence which may be available, arguments in support of its contentions and reliefs which are claimed. The submission of such a document to the CCI satisfies the first requisite of the test that there must be a presentation of their case by parties to the dispute.

It is inconsequential that, in the event the CCI finds no prima facie case of contravention and passes an order to that effect, a presentation of the case is not made by the party against whom the dispute had been raised (Opposite Party) as required by the aforementioned test. This is because the Regulations require that a copy of the information be sent to the Opposite Party. Further, Section 26 of the Act mandates that the order of the CCI is required to be sent to both the informant and the opposite party. These requirements suppose the existence of a dispute between the informant and the opposite party.

Although the aforementioned test requires that the case of both parties to the dispute be presented, the presentation of its case by the Opposite Party may not be required in circumstances where the information lacks sufficient merit for the CCI to make out a prima facie case. The desperate lack of merit in the case of one party such that it obviates the necessity of a response from the other party cannot change the character of the proceeding. The authority to which the case is presented may itself identify the lack of merit and dismiss the matter at the threshold.

The High Courts exercise a similar power at the stage of Preliminary Hearing of a Writ Petition. The only difference is that the Petitioner there is given an opportunity to orally present her case. If the High Court finds that the petition lacks merit, it may dismiss the matter at the threshold without issuing notice to be issued to the Respondent. However, the lack of response from the respondent in a writ petition which lacks merit does not change the nature of the proceeding or the decision made thereon.

Having established that in such cases the act of filing of information meets the first criteria of the test, I shall proceed to examine whether an order made in such cases meets other criteria laid down by the test. The second criteria is that if the dispute is between the parties is a question of fact, the authority must ascertain facts by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence.

In forming a prima facie opinion which is the basis of the order, The CCI would be required to establish the veracity of facts stated in the information. The ascertainment of the veracity of facts is to be done by evaluating evidence produced along with the information. Since no investigation can take place at this stage, the CCI would necessarily be required to rely on evidence produced by the informant in verifying facts. Therefore an order passed under Section 26(1) of the Act would satisfy the second criteria.

So far as the third criteria is concerned, the CCI would ordinarily not consider a question of law while forming a prima facie opinion as to a possible contravention of the Act. It is to be noted that this criteria need not be met if no question of law is raised. Therefore the question of considering a legal argument at this stage does not arise.

An order finding no prima facie case of contravention of the provisions of the Act meets the fourth criteria. This is because it does dispose of the whole of the matter upon a finding upon facts and applying the facts found to the law. As noted earlier, at this stage the CCI is required to examine the veracity of facts by evaluating evidence adduced. This process leads the CCI to come to a finding upon the facts alleged in the information. Once it has made a finding upon the facts, it must determine whether the facts found would on the face of it contravene the provisions of the Act. To that end, it is required to consider arguments made by the informant as to why the facts alleged constitute a contravention of the provisions of the Act.

Thereafter, it must apply the facts found to the law. That is to say, the facts found must be tested against the provisions of the Act so as to determine whether they might on the face of it constitute a contravention of the provisions. It is required to apply its mind while making this determination. It is also required to provide reasons in its order as to why, the findings of fact were so made and as to why it found no contravention on the face of the facts found upon their application to the law.

Now, if an order passed under Section 26(1) of the Act is considered a judicial decision, an order passed by the CCI under Section 27 after consideration of objections by the Opposite Party and questions of law and arguments thereon, is also to be considered a judicial decision.

Examination of Nature of Decision under Section 28

Section 28 of the Act empowers the CCI to pass an order in writing directing the division of a dominant enterprise to ensure that such enterprise does not abuse its dominance. The Act in its current form does not specify a procedure to be followed in passing such orders. Prior to the amendment carried out in 2007, an order under Section 28 was to be passed by the Central Government on a recommendation by the CCI. However such a recommendation could be made only if the CCI had found the enterprise in question to have abused its dominant position in the market under Section 27 of the Act. Therefore prior to the amendment, a condition precedent to an order under Section 28 was an order passed under Section 27.

I would submit that this position has not changed after the amendment. This is because, the prohibition under the Act relates to the actual abuse of dominance rather than a possible abuse of dominance. The objective of the Act is not the prevention of dominance in the markets but the prevention of anti-competitive behaviour which arises out of dominance. A reading of the provision would show that there is no guidance with regard to the circumstances under which the CCI may direct the division of an enterprise. There is no guidance as to the factors which may be considered by the CCI before concluding that an enterprise is likely to abuse its dominant position.

Therefore an order under Section 28 cannot be passed without following the procedure under Section 26. As has been examined, the procedure contemplated under Section 26 leads to a decision that is judicial in nature. Therefore an order passed under Section 28 of the would be a judicial decision.

Examination of Nature of Decision under Section 31

Having established that the CCI exercises judicial powers in passing orders with regard to anti-competitive activities under Section 3 and 4 of the Act, we must examine the nature of the function performed by it in regulating combinations through orders passed under Section 31 of the Act. This function cannot be categorised as one that is purely judicial in nature, since it is not an order arising out of an adversarial proceeding. (However it does attain the character of an adversarial proceeding when objections are filed to the proposed combination by a person who would be affected by it.) The passing of an order under Section 31 of the Act involves the examination of facts pertaining to the combination. The CCI thereafter is required to apply such facts and determine whether the combination is likely to have an appreciable adverse effect on competition in the relevant market. This involves consideration of several factors including whether the combination would enjoy a dominant position in the relevant market after such combination is given effect. A list of factors to be considered by the CCI in deciding the question as to whether a combination is likely to have an appreciable adverse effect on competition in India, is provided under Section 20(4) of the Act. Therefore the CCI is required to apply the facts to the policy laid down by the law and determine the question.

There are several judicial elements to the function performed by the CCI in regulating combinations through orders. The function is not very different from the function performed by a company court in mergers and amalgamations of companies. These functions are more akin to judicial functions than to executive or legislative functions.

From the above analysis it is clear that the primary functions of the CCI performed are judicial in nature. Although it does perform secondary functions which are advisory in nature, they cannot be taken to be a basis of classification of the nature of the body. If the function of the CCI is considered to be the prevention of anti-competitive behaviour through the enforcement of the provisions of the Act, the only powers which enable it to do so are judicial in nature. Without these powers, the CCI would be a toothless body, incapable of enforcing the provisions of the Act. Therefore, I submit that the CCI is to be considered a judicial tribunal.

If the status of the CCI is that of a judicial tribunal, its composition and manner of appointment of members would need to be in line with the guidelines laid down by the Supreme Court in paragraph 120 of its judgment in Union of India v. R. Gandhi which were reiterated in Madras Bar Association v. Union of India. This is because once it is characterized as a judicial tribunal, the CCI becomes a judicial body performing the role of a court.

Therefore the constitution of the CCI, which has a preponderance of non-judicial members, coupled with the fact that they are selected by a committee whose majority of members are appointed by the Central Government are clearly violative of the guidelines laid down by the Supreme Court. For these reasons, I submit that the CCI in its current form is unconstitutional.

Guest Post: On the (Un)Constitutionality of Competition Commission – I

Tags

competition commission, separation of powers, tribunals

[This is a two-part series by Rahul Dev.]

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In April 2019, the Delhi High Court upheld the constitutional validity of the Competition Commission of India (CCI). The challenge to its validity was based on the ground that the structure of the CCI disregarded the constitutional doctrine of the separation of powers. The Petition alleged that the CCI, which was a judicial body performing judicial functions, was not sufficiently independent of the Executive. In this two-part series, I will argue that the CCI is in fact unconstitutional.

Before examining the constitutional validity of the CCI, I believe that a summary of the context in which it was established and its evolution would be useful. A brief overview of the context is as follows: A committee (Raghavan Committee) was appointed by the Government of India in 1999 to advise on a new Competition Law in India. The committee submitted its report in 2000 and recommended the enactment of a new competition law in line with international developments. On the basis of this report the Competition Act 2002 (the Act) was enacted.

Soon after the CCI was established under the Act, A Writ Petition (Brahm Dutt v. Union of India) was filed before the Supreme Court, challenging the Rules prescribed by the Central Government under the Act for the selection of the Chairperson and other Members of the Commission. It was alleged that Rule 3 was unconstitutional on the ground that though the CCI was largely a judicial body, the power to select and appoint its members was conferred on the Central Government. It was contended that the rule in question was contrary to the doctrine of separation of powers and was liable to be struck down.

The Government filed a counter-affidavit refuting the Petitioner’s contentions. However, it thereafter filed two additional counter-affidavits stating that certain amendments were proposed to be carried out in the Act as well as the Rules. It said that the proposed amendments were to be carried out to enable the Chairman and the Members to be selected by a Committee presided over by the Chief Justice of India or his nominee. It was further stated that the alleged usurpation of judicial power would be remedied by the establishment of an appellate authority which would be a judicial body conforming to the doctrine of separation of powers.

The Supreme Court, being of the view that the proposed amendments would have a direct bearing on the outcome of the Writ Petition, did not pronounce a judgment on the issue at that time. It decided to leave all questions open to be decided after the proposed amendments were made, and disposed of the matter. The amendments that were spoken of by the Central Government were carried out in 2007. It was through this amendment that the CCI, which was established in 2003, attained its current structure.

Examination of CCI’s Constitutional Validity by the Delhi High Court

Several car manufacturers who were aggrieved by an order passed by the CCI filed Writ Petitions before the Delhi High Court challenging several provisions of the Act. Through these petitions they, inter alia, challenged the constitutional validity of the CCI. These petitions were heard together and disposed of by a common judgment on 10th April 2019 (Mahindra Electric Mobility Limited and Anr. vs. Competition Commission of India and Anr.).

Section 8 of the Act provides for the composition of the CCI and the qualifications of its members. The violation of the doctrine of separation of powers by Section 8 may have been raised since it does not mandate that a majority of the members ought to be qualified to be appointed to a judicial office. Section 9 of the Act provides for the manner of appointment of the members of the commission. It provides that the members of the CCI are to be appointed by the Central Government from names recommended by a Selection Committee. The Selection Committee is to consist of the Chief Justice of India or his nominee and four other members to be appointed by the Central Government. The conceivable basis of challenge under this provision is that appointments to a judicial body are controlled by the Central Government.

The Delhi High Court heard the matter and held that the CCI does not violate the doctrine of separation of powers. I submit that the decision of the Court is incorrect.

A violation of the doctrine of separation of powers entails an encroachment by one organ of the State into the powers of another. In this case it entails the encroachment by the Executive into the powers of the Judiciary. Therefore the first question that requires consideration is:

Whether the CCI is a part of the judiciary? In other words, can the CCI be considered a judicial body?

The Delhi High Court examined the nature of the functions performed by the CCI as well as its status so that it may decide whether the CCI is a judicial body or not . However, the question for consideration was framed in a way which could not aid the court in deciding whether the CCI is a judicial body. The question framed was:

“Is the CCI a tribunal exercising judicial functions, or is it performing administrative and investigative functions and also adjudicating issues before it?”

The question has two parts. The first part: “Is the CCI a tribunal exercising judicial functions?” the second part: “or, is it performing administrative and investigative functions and also adjudicating issues before it?” Therefore, the question gives rise to two possibilities.

First possibility: The CCI is a judicial body performing judicial functions.

Second Possibility: The CCI performs judicial functions as well as administrative and investigative functions.

The two possibilities may not be mutually exclusive. That is to say, the two possibilities could occur simultaneously. The CCI could be a judicial body which also performs other administrative and investigative functions (perhaps in the course of performing its judicial functions).

The question however divides the two possibilities by the word ‘or’. By doing so it is assumed that it is not possible for a body to be a judicial body and perform investigative functions and minor administrative functions.

In my submission, a situation where a judicial body may in fact perform minor investigative and administrative functions. The CCI itself is such a body. The civil courts are also such bodies. One may refer to the powers of a civil court under Order XXVI Rule 9 of the Code of Civil Procedure 1908, to issue a commission to a person to conduct local investigations to elucidate on a matter in dispute and file a report regarding such investigations. A report filed by the commissioner along with the evidence collected would be evidence in the suit. The investigation carried out by the commissioner on the orders of the court is nothing but a fact finding exercise. It is an exercise of collection of evidence by the Court. The nature of this function may not be termed as an adjudicatory but an investigative one. However, this function is performed to aid the court in deciding certain issues in a suit. It is a means to perform the end function of the court which is judicial in its nature. Merely because it also performs this investigative function in aid of its judicial functions, it cannot be said that the civil court is not a judicial body. The function of investigation performed by the Director General on the orders of the CCI are to be seen in the same light.

Now, the question as to whether the CCI is a judicial body requires to be answered. In the discussion on the nature of the functions performed by CCI the Delhi High Court relied heavily upon the decision of the Supreme Court in Competition Commission of India vs. Steel Authority of India and Anr. I submit that the reliance on this decision by the High Court was misplaced. The High Court quoted a passage from the decision of the Supreme Court which states (without discussion on the point) that the functions of the CCI are wide and held that it was bound by this enunciation of law. The passage quoted was:

“75. … Under the scheme of the Act, this Commission is vested with inquisitorial, investigative, regulatory, adjudicatory and to a limited extent even advisory jurisdiction. Vast powers have been given to the Commission to deal with the complaints or information leading to invocation of the provisions of Sections 3 and 4 read with Section 19 of the Act”.”

This statement was made by the Supreme Court as a part of an overview of Competition Law in India. The overview did not pertain to any particular issue but was generally made before the issues in that case were taken up for discussion. It may safely be said that the statement forms a part of the obiter-dicta of the judgment. It was wholly irrelevant to that case, in which the questions revolved around the scope of powers of the CCI in forming a prima facie opinion under Section 26(1) of the Act. The statement being a part of the obiter-dicta of the judgment was not binding on the Delhi High Court.

The reliance placed by the High Court upon the decision of the Supreme Court in Steel Authority of India Limited (supra) was misplaced for another reason. The question that arose for the consideration of the Supreme Court in Steel Authority of India Limited (supra) was with regard to the scope of power of the CCI while forming a prima facie opinion under Section 26(1) of the Act. In order to answer that question it considered the nature of the function performed by the CCI specifically under Section 26(1) of the Act. In coming to the conclusion that the function under Section 26(1) of the Act was inquisitorial, it did not characterize any other function of the CCI to be inquisitorial. It was only the function of forming a prima facie opinion which was considered to be inquisitorial.

The Delhi High Court however applied this finding to characterize the entire proceeding before the CCI. This is apparent from its statements in paragraphs 76 and 77 of its decision. The statements read as under:

76. Characterizing the proceeding before CCI as one akin to the preliminary stages of a departmental proceeding, the court, in SAIL (supra), held that prima facie opinion formation was merely an administrative function and that inquiry into the information or complaint (received by CCI) commences after such opinion was formed…”

77. It is therefore clear that though information or complaint which may trigger an inquiry, (but not necessarily so, in all cases) is received by the CCI, the initial steps it takes are not always towards, or in aid of adjudication. They are to ascertain fuller details and inquire into the veracity (or perhaps) seriousness of the contents of the information, to discern whether such investigation and further steps towards adjudication are necessary.

 

This mischaracterization of the entire proceeding before the CCI may have been overlooked if the Court thereafter analysed the other functions of the CCI independently and came to its conclusions as to their nature. However, the decision lacks such an analysis.

(I would submit that the finding made by the Supreme Court in Steel Authority of India Ltd. (supra) that the CCI performs only an administrative function in forming a prima facie opinion under Section 26(1) of the Act is incorrect. This is because the formation of a prima facie opinion requires the application of facts to the law. Thereafter it involves the application of a judicial mind to determine whether from the set of given facts a possibility of contravention of the law exists. The function under Section 26(1) of the Act does not end at ascertaining the veracity or seriousness of the contents of information. It is one of the functions to verify the contents of the information, but not the only one. The important function under Section 26(1) of the Act is the formation of a prima facie opinion. A detailed analysis has been made later in this article. For now, we may assume that the Delhi High Court was bound to hold the function under Section 26(1) as inquisitorial.)

Instead of analysing the other functions of the CCI, the High Court summarised them and ambiguously stated that the functions were administrative in nature. The relevant portion of the judgment has been extracted below:

78. At the next stage, after CCI directs investigation, the Director General (DG), after investigation, has to report to it [Section 26 (2)]. If the recommendation of the DG is that no case exists, the CCI is nevertheless obliged to forward a report to the informant/complainant, receive its or his comments and afford a hearing [Section 26 (5)]. After the hearing, it may dismiss the complaint [Section 26 (6)]; or direct further inquiry [Section 26 (7)]. If, on the other hand, the DG‟s report recommends that there exists some contravention of provisions of the Act, the CCI has to proceed further, and inquire into that [Section 26 (3) read with Section 26 (8)]. The CCI has limited powers of the civil court [Section 36 (2)] in matters such as (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavit; (d) issuing commissions for the examination of witnesses or documents; (e) requisitioning, subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), any public record or document or copy of such record or document from any office. The CCI can also require the opinion of experts [Section 36 (3)]. Significantly, CCI has no power to review its orders: previously, Section 37 permitted review; however, the 2007 amendment repealed that provision; it has limited rectification power, under Section 38. In case of imposition of penalty, one mode of recovery is through reference to the concerned income tax authority [Section 39 (2)]; such officer or income tax authority can then recover the penalty as if the party concerned were an ―assessee in default‖ under provisions of the Income tax Act [Section 39 (3)]. These investigative powers are also conferred concurrently upon the DG [Section 41 (2)].

A reading of the above paragraph reveals that there is no analysis whatsoever into the nature of the functions mentioned. The functions mentioned are clearly different from that discussed by the Supreme Court in its decision in Steel Authority of India Limited (supra). For instance, in the summary of functions made by the Court, it is mentioned that the CCI may dismiss the complaint based on the recommendation of the Director General that no case contravention of the Act exists. However, it may do so after hearing the parties concerned. This function of dismissal of the complaint is, on the face of it, adjudicatory. However no discussion into its nature has been made by the High Court.

There is another problem with examining independent functions such as investigation directed by the CCI in an inquiry under Section 19 of the Act, or the dispatch of notice upon the receipt of information from an informant. These functions are performed as a part of the entire function of conducting the inquiry and passing orders. They are never performed on their own or in isolation. For instance, an order directing the Director General to conduct an investigation can never be passed without an inquiry being initiated under Section 19 of the Act. If they were performed in isolation, their performance would lead to no logical end. Therefore the nature of these functions cannot be taken to characterize the CCI. The nature of the larger function is to be examined in order to determine the nature of functions performed by the CCI.

Thereafter, the High Court erroneously relied on the decision of the Supreme Court in Excel Crop Care India v. Competition Commission of India, to delineate the role of the CCI. In that case a contention was taken up by the Appellant that the Director General has no jurisdiction to investigate certain anti-competitive activities which took place after information had been filed with the CCI under Section 19 of the Act. Therefore the question in that case was whether the jurisdiction of the Director General in conducting investigations under the Act extended to actions which took place after the information had been filed. It did not pertain to the role of the CCI or the nature of functions performed by it. There was no discussion by the Court on this aspect.

The Delhi High Court quoted a passage from the said decision of the Supreme Court which did not discuss the role of the CCI in any manner and held that the said decision underlined the role of the CCI through investigation. In my submission, the decision of the Supreme Court does not aid the identification of the nature of functions of the CCI.

It was thereafter held that the CCI does not solely perform adjudication so that it may be characterized as a tribunal discharging solely judicial powers of the state. It was rather considered to be an administrative body which also performs quasi judicial functions.

The second issue framed by the High Court was whether the CCI violates the doctrine of separation of powers and is therefore unconstitutional. A vague continuation of the discussion as to the character of the CCI was made. The structure of the CCI was compared to regulatory bodies such as SEBI, TRAI, AERA, AAI and State Commissions and the Central Commission under the Electricity Act and it was stated that statutes governing these bodies do not require that its officers performing adjudicatory functions need not possess judicial experience. Such comparisons could not assist the Court in determining the character of CCI since the functions performed by these bodies differ widely. The CCI is fundamentally different since it does not have any legislative or executive powers, barring limited powers to regulate its own procedure.

The Court thereafter recognised that the CCI does perform certain adjudicatory functions in passing orders. However, it held that the adjudicatory functions were not to be given such primacy as to hold the CCI to be a judicial tribunal. Therefore, the challenge to the constitutional validity of the CCI on the ground that it was a violation of the doctrine of separation of powers was rejected.

In my opinion the finding that adjudicatory functions of the CCI cannot be given primacy is incorrect. It is a finding that is crucial to the point in discussion since the nature of an independent function would change the nature of the body depending on the weight attached to the function in question. That discussion will be taken up in the next post.

The Tribunals Judgment – II: On Independence

Tags

Right to Information, tribunals

[Editorial Note: Justice is an indivisible concept. We cannot, therefore, discuss contemporary Supreme Court judgments without also acknowledging the Court’s failure – at an institutional level – to do justice in the case involving sexual harassment allegations against the Chief Justice. This editorial caveat will remain in place for all future posts on this blog dealing with the Supreme Court, until there is a material change in circumstances.]

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In yesterday’s post, I discussed the significance of the Tribunals Judgment on the vexed issue of money bills. Today’s post discusses the judgment’s engagement with the principal legal provision under challenge – Section 184 of the Finance Act. While the majority upheld the constitutionality of the Finance Act – but struck down the Rules framed under it – Chandrachud and Gupta JJ, writing separate dissenting opinions, struck down the primary legislation as well.

Recall that Section 184 of the Act authorised the Government to “by notification, make rules to provide for qualifications, appointment, term of office, salaries and allowances, resignation, removal and the other terms and conditions of service” of Tribunal Members. It set upper age limits, and prohibited the variance of the terms and conditions to the detriment of members, after their appointment. The Petitioners argued this amounted to excessive delegation, and would make “the Tribunals amenable to the whims and fancies of the largest litigant, the State.” On the other hand, the Section was defended by the Union of India on the ground that the existence of multiple Tribunals in the country required harmonisation.

The Majority Opinion 

The Act

The Majority Opinion restated the law on excessive delegation, noting that what is prohibited is the “abdication or effacement by conferring the power of legislation to the subordinate authority” (in this case, to the government) – that is, “essential legislative functions” could not be delegated. Or, to put it another way, legislation would have to stipulate the policy with sufficient clarity, while leaving the implementation of it to the executive branch.

Applying this test, the Majority held that Section 184 did not suffer from excessive delegation. However, the Majority’s rationale for that was somewhat curious. In paragraph 143, it noted:

The objects of the parent enactments as well as the law laid down by this Court in R.K. Jain (supra), L Chandra Kumar (supra), R. Gandhi (supra), Madras Bar Association (supra) and Gujarat Urja Vikas (supra) undoubtedly bind the delegate and mandatorily requires the delegate under Section 184 to act strictly in conformity with these decisions and the objects of delegated legislation stipulated in the statutes. It must also be emphasised that the Finance Act, 2017 nowhere indicates that the legislature had intended to differ from, let alone make amendments, to remove the edifice and foundation of such decisions by enacting the Finance Act. Indeed, the learned Attorney General was clear in suggesting that Part XIV was inserted with a view to incorporate the changes recommended by this Court in earlier decisions.

In other words, the Majority held that the “policy” came not from the Finance Act, but from previous judgments of the Court that had set out the framework within which Tribunals would necessarily have to function; and it then deemed that the Finance Act had adopted this framework, as it had given no indication to the contrary. This framework, the Majority went on to hold, was constituted by principles such as independence (both individual, and institutional) of the Tribunal. Independence required “a sufficient degree of separation” between Tribunals and the Government:

Functional independence would include method of selection and qualifications prescribed, as independence begins with appointment of persons of calibre, ability and integrity. Protection from interference and independence from the executive pressure, fearlessness from other power centres – economic and political, and freedom from prejudices acquired and nurtured by the class to which the adjudicator belongs, are important attributes of institutional independence. (paragraph 144)

It must be said that this is a somewhat innovative development in the law of excessive delegation. Interestingly, the Court was unable to provide precedent to support its view that “legislative policy” – the existence of which was an essential precondition for delegation to be valid – could itself be – er – delegated to the Courts instead. That said, however, this was a highly specific case: the history of Tribunalisation in India has been a history of dialogue between the Court and the Legislature; in a sense, the constitutional framework within which Tribunals function has evolved out of this dialogue. To the extent that the Majority Opinion is justifiable, then, it is a justification that – at best – is limited to the facts of this case.

The Rules

Having laid out the principle of independence – and what it required – the Majority went on to examine the Rules that the government had passed under Section 184. Appointment to the Tribunals were to be made upon the recommendation of a “Search-cum-Selection Committee.” These Committees were dominated by government nominees and bureaucrats. On this basis, the Majority Opinion held that “the lack of judicial dominance in the Search-cum-Selection Committee is in direct contravention of the doctrine of separation of powers and is an encroachment on the judicial domain.” (paragraph 153) This was specially important because “the Executive is a litigating party in most of the litigation and hence cannot be allowed to be a dominant participant in judicial appointments.” (paragraph 157)

Next, the Majority found that the qualification of the members was lacking. Technical members without any adjudicatory experience could be appointed, and Presiding Officers need not have any judicial experience. This was particularly important, as these Tribunals had been formed after divesting the Courts from adjudicating in these domains; consequently, it was necessary that “the qualification and acumen of the members in such Tribunal must be commensurate with that of the Court from which the adjudicatory function is transferred.” (paragraph 163) And even the qualifications of judicial members had been weakened, with a substantial amount of discretion being placed in the hands of the government, to appoint individuals it considered suitable. This, the Majority held, was unconstitutionally vague.

Thirdly, the Majority found that the removal process vested too much power in the hands of the government as well; the government could constitute a committee, which could recommend removal. The Court noted that “it is well understood across the world and also under our Constitutional framework that allowing judges to be removed by the Executive is palpably unconstitutional and would make them amenable to the whims of the Executive, hampering discharge of judicial functions.” (paragraph 169)

Fourthly, the Majority found that there were inconsistencies in retirement ages, and the tenures themselves were short – they were of three years. The Court held that “a short tenure, coupled with provision of routine suspensions pending enquiry and lack of immunity thereof increases the influence and control of the Executive over Members of Tribunals, thus adversely affecting the impartiality of the Tribunals.” (paragraph 175)

On the bases of these findings (summed up in paragraph 179), the Majority Opinion found the Rules to be unconstitutional, and struck them down.

These observations and findings are undoubtedly correct. The Majority Opinion drew a clear link between institutional independence (the “policy” underlying tribunalisation, as reflected in the Finance Act), and the government control over (a) appointments, (b) qualifications, (c) removal, and (d) tenure. It also went on to note – while considering the issue of a “nodal agency” to oversee the functioning of tribunals – the importance of (e) financial independence.

And lastly, the Majority Opinion found that direct appeals from the Tribunals to the Supreme Court were constitutionally problematic, and directed the government to reconsider the appeals process within six months. Perhaps unfortunately, however, the Majority Opinion framed this as a question more about judicial efficiency, and less about a valuable procedural right to access the High Courts under Article 226.

The Concurring/Dissenting Opinions

A large part of Justice Chandrachud’s substantive analysis of the Act was integrated with his analysis of the Money Bill issue (discussed in the previous post). Chandrachud J. did note, however, that:

By leaving the rule making power to the uncharted wisdom of the executive, there has been a self-effacement by Parliament. The conferment of the power to frame rules on the executive has a direct impact on the independence of the tribunals. Allowing the executive a controlling authority over diverse facets of the tribunals would be destructive of judicial independence which constitutes a basic feature of the Constitution. (paragraph 88)

While this was not framed as a response to the Majority Opinion on the issue of excessive delegation, in effect, that is what it is. According to Chandrachud J., Parliament could not validly delegate “controlling authority” over Tribunals to the Executive, given the overarching framework of judicial independence. On the analysis of the Rules, Chandrachud J.’s analysis mirrored that of the Majority.

Lastly, on the issue of excessive delegation, Gupta J. filed a brief opinion agreeing with Chandrachud J. As he observed:

We are in the present case dealing with the appointment of Chairpersons/Members to various Tribunals. They are enjoined upon to discharge a constitutional function of delivering justice to the people. What should be the essential qualifications and attributes of persons selected to man such high posts is, in my view, an essential part of legislative functions. (paragraph 27)

Gupta J. went on to make the important point that the Constitution itself could not have “delegated” the appointment process for judges to the executive (although recall that the NJAC did delegate it to the legislature!). And if Tribunals were meant to substitute for Courts, then – logically – the same considerations had to apply. Gupta J. specifically took issue with the Majority Opinion that the legislative policy was provided by the judgments of the Court; he noted – and in my view correctly – that it could not always be assumed that the other branches were prompt and accurate in following Court judgments.

Addendum: Impact upon the RTI Amendments 

Previously on this blog, we have discussed the amendments that were made to the RTI Act earlier this year. In a similar fashion, the RTI Amendments had delegated to the Government authority over the constitution and running of the Information Commission, through secondary legislation. Now, it is true that the Information Commission is not identical to the Tribunals that were dealt with under the Finance Act. That said, however, in my view, this judgment has an important impact upon the RTI Amendments – and the Rules that were subsequently framed.

First, let us see the extent to which there is similarity between the two situations. In my view, the similarity exists in two important respects. First, in view of the fundamental right to information, and the role played by the Information Commission (as I argued in that earlier post), the requirement of individual and institutional independence is at least as pressing for the Information Commission as it is for the Tribunals. Secondly, the presence of the government as the largest litigator was an important factor in this case; in the RTI context, however, the Government is an even bigger litigator, as information requests are made to Public Information Officers. Institutional independence, then, becomes even more important.

With that having been established, this judgment makes clear that (a) appointment, (b) qualifications, (c) removal, (d) tenure, and (e) financial independence are all integral facets of institutional independence. While the Court’s specific findings with respect to the adjudicatory character of the Tribunals may not be directly applicable (although the point is arguable), the link between the above five factors and government control applies across the board. The RTI Rules, therefore, can be directly examined under this framework.

And lastly, as I have argued above, the Majority Opinion’s finding that Section 184 did not suffer from excessive delegation was based upon the very specific history of the tribunalisation. In the absence of that history, I believe that it is more than arguable that the RTI Amendments suffer from the vice of excessive delegation (again, in the context of the fact that the right to information is a fundamental right); indeed, Chandrachud and Gupta JJ.’s dissents on the point show us exactly how.

It remains to be seen, however, how the Courts will deal with these issues if a challenge is brought before them.

 

Carving out an exception to the basic structure?: The Supreme Court’s judgment on Judicial Review and the Armed Forces Tribunal

Tags

basic structure, judicial review, tribunals

On March 11, the Supreme Court held in Union of India vs Major General Shri Kant Sharma that Sections 30 and 31 of the Armed Forces Tribunal Act effectively excluded the jurisdiction of the High Courts to hear petitions challenging orders of the Armed Forces Tribunal. This judgment is worth a close scrutiny, because while it seems to carve out an exception to the well-accepted rule that judicial review under Articles 226 and 227 of the Constitution is part of the basic structure, the Supreme Court expressly denied that to be the basis of its decision.

The Armed Forces Tribunal Act is a law dealing with the adjudication of service-related disputes for members of the Armed Forces, as well as court martials, and matters incident thereto. The Act provides for the establishment of an Armed Forces Tribunal to adjudicate service matters with respect to the armed forces. Clearly, its functions are similar to that of the Central Administrative Tribunal (its composition is not, but since that aspect is not addressed by the judgment, we will not discuss it here).

The crucial sections at issue were Sections 30 and 31, which provided for appeals from the orders of the Tribunal. Section 30 states:

“Subject to the provisions of section 31, an appeal shall lie to the Supreme Court against the final decision or order of the Tribunal (other than an order passed under section 19).”

Section 31 likewise states:

“An appeal to the Supreme Court shall lie with the leave of the Tribunal; and such leave shall not be granted unless it is certified by the Tribunal that a point of law of general public importance is involved in the decision, or it appears to the Supreme Court that the point is one which ought to be considered by that Court.”

Sections 30 and 31, therefore, lay down the procedure for appealing an order of the Armed Forces Tribunal to the Supreme Court. Parallel to this, Section 33 excludes the jurisdiction of civil courts, and Section 34 provides the transfer of all pending cases (including cases in the High Courts) to the Tribunal, after the commencement of the Tribunal.

The question before the Court was whether Sections 30 and 31 barred the jurisdiction of the High Courts from hearing petitions (under 226/227) against the orders of the Armed Forces Tribunal. The Court began by pointing out certain specific provisions of the Constitution. Under Article 33 of the Constitution, Parliament may modify the operation of Part III to the armed forces. Article 227(4) of the Constitution, part of the provision dealing with the superintendence of the High Courts, provides that “nothing in this article shall be deemed to confer on a High Court powers of superintendence over any court or tribunal constituted by or under any law relating to the Armed Forces.” Article 136(2), part of the provision dealing with special leave to appeal to the Supreme Court, provides that “nothing in clause ( 1 ) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces.”

At this point, the following argument seems to be there to be made: admittedly, judicial review under Articles 226 and 227, and under Article 32, is part of the basic structure of the Constitution. But the Constitution itself, through various provisions, carves out an exception in the cases of the armed forces, where the scope of judicial review is to be regulated by statute (Articles 227(4) and 136(2)). Consequently, Parliament may, by law, bar the jurisdiction of the High Court to hear appeals from orders passed by the Armed Forces Tribunal.

Such an argument is open to objection. It also raises the fascinating question of whether an original constitutional provision can be unconstitutional because it violates the basic structure (if judicial review is part of the basic structure, than how can 227(4) and 136(2) be consistent with that?)). The Court, however, did not make this argument at all. Instead, it first affirmed the proposition that the Armed Forces Tribunal Act cannot take away the jurisdiction of the High Court under Articles 226 and 227 (paragraph 25).

The Court then cited a number of precedents for the proposition that although the jurisdiction of the High Court could not be taken away by any statute, in deciding whether or not to exercise its jurisdiction, the High Court must take into account the legislative intention behind the statute in question. Citing the prior case of Nivedita Sharma vs Cellular Operators Association of India, the Court observed that “when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.” (paragraph 25)

But what was the statutory forum in the present case? Here is where the judgment becomes somewhat murky. Paragraph 33 of the judgment is preceded by a heading called “Statutory remedy“. Here, the Court cited the case Union of India vs Brigadier P.S. Singh Gill, and extracted a lengthy set of paragraph that detailed the appeals procedure under Sections 30 and 31 of the Armed Forces Tribunal Act. But Sections 30 and 31, as we saw, provide for an appeal to the Supreme Court. Surely the provision of an appeal to the Supreme Court cannot be the “alternative statutory forum” to the jurisdiction of the High Courts! That would fly in the fact of the Chandra Kumar judgment, the entire history of the Tribunals Cases and, indeed, the fundamental proposition that Articles 226/227 are part of the basic structure.

But then what is the alternative statutory forum? The only possible answer has to be: the Armed Forces Tribunal itself. This, indeed, is what the Court implied earlier in the judgment. In paragraph 14, it stated that: “it is clear from the scheme of the Act that jurisdiction of the Tribunal constituted under the Armed Forces Tribunal Act is in substitution of the jurisdiction of Civil Court and the High Court.“

But there is a serious problem here. And that is the L. Chandra Kumar judgment. In that case, as is well-known, a seven-judge bench of the Supreme Court held that Tribunals, as they were constituted an functioning, could act complementary to the High Courts, but not as substitutes. This was because:

“The constitutional safeguards which ensure the independence of the Judges of the superior judiciary, are not available to the Judges of the subordinate judiciary or to those who man Tribunals created by ordinary legislations. Consequently, Judges of the latter category can never be considered full and effective substitutes for the superior judiciary in discharging the function of constitutional interpretation. We, therefore, hold that the power of judicial review over legislative action vested in the High Courts under Articles 226 and in this Court under Article 32 of the Constitution is an integral and essential feature of the Constitution, constituting part of its basic structure. Ordinarily, therefore, the power of High Courts and the Supreme Court to test the constitutional validity of legislations can never be ousted or excluded.”

This has been a constant position of law. In its recent judgment, striking down the National Tax Tribunals, the Supreme Court based its entire analysis on a detailed demonstration of how the Tribunals lacked the essential qualities of the Courts (judicial independence etc.), that would allow them to serve as effective substitutes.

The Court’s judgment, therefore, is question-begging. It takes the existence of the Armed Forces Tribunal to be evidence of an “alternative statutory forum” that is a “substitute” for the High Courts. On that basis, it holds that while the jurisdiction of the High Courts cannot be ousted, it should not exercise its jurisdiction because of the existence of the alternative forum! As I have endeavoured to show, in my opinion, both steps of the argument are ill-founded, and in conflict with established precedent. Furthermore, why wouldn’t exactly the same reasoning apply to the Central Administrative Tribunal? What was needed in this case, to complete the argument was a detailed analysis showing that the Armed Forces Tribunal, in its composition, structure and powers and functions, was an effective substitute for the High Court. This, however, was not done.

The Court buttressed its judgment by pointing to a possible “anomalous situation” that would be created by permitting the High Courts to exercise their jurisdiction. It observed, in para 37:

“If any person aggrieved by the order of the Tribunal, moves before the High Court under Article 226 and the High Court entertains the petition and passes a judgment or order, the person who may be aggrieved against both the orders passed by the Armed Forces Tribunal and the High Court, cannot challenge both the orders in one joint appeal. The aggrieved person may file leave to appeal under Article 136 of the Constitution against the judgment passed by the High Court but in view of the bar of jurisdiction by clause (2) of Article 136, this Court cannot entertain appeal against the order of the Armed Forces Tribunal. Once, the High Court entertains a petition under Article 226 of the Constitution against the order of Armed Forces Tribunal and decides the matter, the person who thus approached the High Court, will also be precluded from filing an appeal under Section 30 with leave to appeal under Section 31 of the Act against the order of the Armed Forces Tribunal as he cannot challenge the order passed by the High Court under Article 226 of the Constitution under Section 30 read with Section 31 of the Act. Thereby, there is a chance of anomalous situation.”

But surely, if the Armed Forces Tribunal passes an order, which is assailed to the High Court under Article 226, and either party is aggrieved by the High Court’s decision, then the petition to the Supreme Court will be against the High Court’s order, and not the Tribunal’s? Why would there be a need to appeal the order of the Tribunal before the Supreme Court, when the most proximate decision is that of the High Court?

In any event, whatever the merits of the anomalous situations, the other objections to the judgment remain. The Supreme Court has deprived members of the armed forces an important constitutional remedy against the violation of their rights. It’s justification for doing so, I would suggest with respect, is unconvincing.

The National Tax Tribunals Judgment: Two Interesting Constitutional Issues

Tags

structural analysis, transformative, tribunals

Last week, in a judgment that caused quite a stir, the Supreme Court held the National Tax Tribunal Act (and, consequently, the National Tax Tribunal, a centralised adjudicatory for the purpose of deciding and harmonising substantive questions of tax law) to be unconstitutional. I have written a detailed analysis of the judgment elsewhere; in brief, the Court held that the NTT Act transferred the jurisdiction of the High Courts to the Tax Tribunal without ensuring that the Tribunal had sufficient trappings of a Court (e.g., independence and qualifications of its judges etc.) Consequently, it fell foul of the L. Chandra Kumar judgment, and the principle of separation of powers (which the Court rather mysteriously treated as a “constitutional convention”). In a pithy concurring opinion, which is well worth a read, Nariman J. held that it was impermissible to remove the judicial power of deciding substantial questions of law from the High Court.

In this post, I want to focus on two issues thrown up by the judgment, which have been discussed before on this blog, albeit mainly from a theoretical perspective. In its judgment, the Supreme Court relied extensively on the 1975 Privy Council case of Hinds vs The Queen. Hinds was an appeal from the Court of Appeals of Jamaica. The Jamaican Parliament had passed the “Gun Court Act”, which set up a parallel court system to try certain firearm-related offences. One of the courts it set up was vested with the jurisdiction and powers otherwise enjoyed by the higher judiciary, but its officials possessed neither the independence, and nor the qualifications, that were also enjoyed by the higher judiciary under the Jamaican Constitution. The Privy Council found the act to be unconstitutional, since it violated the principle of the separation of powers between executive and judiciary, which – it held – was a “necessary implication” flowing from the structure of post-colonial, commonwealth “Westminster Constitutions”; it had done so, specifically, by transferring the jurisdiction of the senior judiciary to a parallel court, without guaranteeing the judicial independence of the officers of that court through the rules of tenure, appointment and retirement that applied to regular, senior judges.

In its NTT judgment, the Supreme Court quoted extensively from Hinds. In particular, consider this quotation, which comes after the Privy Council referred to Canadian, Australian and other commonwealth Constitutions (notably, not the Indian):

“All of them [Constitutions] were negotiated as well as drafted by persons nurtured in the tradition of that branch of the common law of England that is concerned with public law and familiar in particular with the basic concept of separation of legislative, executive, and judicial power as it had been developed in the unwritten Constitution of the United Kingdom. As to their subject matter, the peoples for whom these new Constitutions were being provided were already living under a system of public law in which the local institutions through which government was carried on, the legislature, the executive and the courts, reflected the same basic concept. The new Constitutions, particularly in the case of unitary states, were evolutionary, not revolutionary. They provided for the continuity of government through successor institutions, legislative, executive and judicial, of which members were to be selected in a different way, but each institution was to exercise powers which, although enlarged, remained of a similar character to those that had been exercised by the corresponding institution that it had replaced.”

Previously on this blog, I’d drawn a distinction between two types of constitutional provisions: conservative and transformative. Most Constitutions are framed at a point of a decisive break with the past, with its institutions and its values, and certain aspects of a Constitution reflect the “transformation” from one set of values and institutions to another; but the past is never a wholly foreign country, and many institutions and structures not only survive revolutionary moments, but are actually entrenched and strengthened in a Constitution, through its “conservative” provisions. A good – albeit schematic – example is that of the American Constitution: its Bill of Rights was (largely) conservative, seeking to guarantee to the American citizens the ancient and deeply-rooted common law rights (e.g., to a jury trial, against unreasonable searches and seizures etc.) enjoyed by British subjects. On the other hand, the Constitution proper was transformative, replacing British monarchy with a system of representative, republican government, exercised through three separate wings of State.

Whether a particular constitutional provision is conservative or transformative, and to what extent it is transformative can have profound implications for constitutional interpretation. For instance, it is sometimes argued that the American Nineteenth Amendment, which guaranteed women the right to vote, transformed not only their voting status, but the entire legal and political framework, based upon the inferior political and legal status of women, that underlay and justified the denial of their right to vote until that moment. Consequently, the Nineteenth Amendment is used by scholars to ground a jurisprudence of sex-equality and non-discrimination within the American Constitution.

Earlier, in the context of India, I’d tried to argue that the transformative nature of Article 15 justified Naz Foundation (Delhi HC’s) reading of “sexual orientation” into “sex”: in providing a universal guarantee of non-discrimination on a set of grounds that were traditionally the sites of social oppression, the Constitution was signaling a shift from a society in which moral membership in society was contingent upon certain unchangeable aspects of one’s personality (race, caste, sex, place of birth, religion) to one in which ever individual was guaranteed equal moral membership, regardless of those unchangeable aspects (and sexual orientation was one such).

In Madras Bar Association, the Supreme Court applies this interpretive technique, by holding that the Constitution’s structural provisions, which set up the institutions and modes of government, are conservative: they entrench the “Westminster model” that was in practice in colonial India, one of whose features was the separation of powers and concomitant independence of the judiciary, guaranteed through appointment processes and security of tenure. Notice that this interpretive technique is based, ultimately, on a historical claim: whether this “Westminster model” was actually made part of our Constitution and, if so, to what extent, needs to be deciphered not merely from the constitutional text, but from a detailed investigation into its history. Unfortunately, the Supreme Court does nothing of the sort: it glibly assumes that the Westminster Model is the model of our Constitution, and decides the case accordingly. This is problematic because the Constitution was, after all, framed in a post-colonial moment, and it requires much argument to demonstrate what set of structures and institutions the framers simply wished to see carry on unchanged into the new republic; however, the use of the analysis itself is promising, and bodes well for the future.

The other paragraph from Hinds that the Court quoted was:

“Because of all this a great deal can be, and in drafting practice often is, left to necessary implication from the adoption in a new constitution of a governmental structure which makes provisions for a Legislature, an Executive and a Judicature. It is taken for granted that the basic principle of separation of powers will apply to the exercise of their respective functions by these three organs of government… [and] what is implicit in the very structure of a Constitution on the Westminster Model is that judicial power, however it be distributed from time to time between various courts, is to continue to be vested in persons appointed to hold judicial office in the manner and on the terms laid down in the chapter dealing with the Judicature, even though this is not expressly stated in the Constitution.“

Previously on this blog – also in the context of Naz Foundation – we had discussed constitutional structure as one of the bases for interpretation. A structural analysis derives constitutional obligations or principles not from a textual reading of individual or aggregated provisions, but – as the American jurist Charles Black explained – from the “structure and relations… created by the text… and the inferences drawn from them.” Or, to put it in more linguistic terms, there are things that a Constitution says, and there are things that it does not say, but which, when it is taken as a whole, it necessarily implies.

In the Hinds case, much of the argument was historical: separation of powers and independence of the judiciary simply was a basic feature of Westminster governance. But, as we saw in the excerpts, the Privy Council speaks of the “structure” of the Constitution on the Westminster model, and uses the term “necessary implications”. The structural argument is quite straightforward: Constitutions are the fundamental documents creating and detailing the division of powers among the governing institutions in society. A deliberate and intentional division into three separate wings, with specific duties attached to each wing, presupposes that (in the absence of clear contrary evidence), the Constitution requires that the domains that it has marked out for each of the wings be protected from encroachment by the others. Thus, separation of powers and the independence of the judiciary simply come out as structural corollaries of the Westminster-type Constitution.

Something along these lines was the reasoning of the Privy Council in Hinds. Unfortunately, the Supreme Court walked down a very different path: it held that separation and independence were constitutional “conventions”, and accordingly, had to be upheld. This is unfortunate, because of course the meaning of convention is, precisely, that which is not legally enforceable. Thus, the Court’s decision is deeply problematic on this point.

Notwithstanding that, however, these two issues remain fascinating for the debate over constitutional interpretation. The conservative/transformative model is perhaps truest to Indian history, and can serve as an interpretive guide to a number of provisions; and, constitutional provisions flowing necessarily from the structure of the Constitution can have as much legal force as the text itself. The judgment in Madras Bar Association opens the gates for a further decision to engage with and clarify these interpretive points; whether future courts will accept the invitation is something that remains to be seen.