Case: National Company Law Tribunal Bar Association Vs. Union of India

the Court was apprised, the process of selection has been concluded by the Selection Committee and recommendations have been made. The appointment process shall be concluded within a period of four to six weeks. For the second tranche of 15 vacancies, a notification inviting applications has already been issued with 12 August 2022 being the last date for application. In this backdrop, the grant of any relief would interfere with the ongoing selection process. 20. That apart, it is evident that when the incongruity in the term of office of three years was drawn to the attention to the Selection Committee chaired by the Chief Justice of India, a report was called from the President of the NCLT on the work performance and suitability of the Members. After the initial meeting of 20 April 2022, the Selection Committee at its meeting on 6 June 2022 adverted to the sensitive nature of the functions and duties of the Members, the verification carried out with regard to character and antecedents and the report on performance and suitability. The Union Government was, therefore, directed to take appropriate action. It is in pursuance of these minutes that the Union Government has issued a notification dated 14 June 2022 extending the tenure of two judicial and six technical members for a period of five years or until they attain the age of sixty-five. 21. The submission which has been urged on behalf of the petitioner is that Section 417 of the Companies Act 2013 provides a procedure for the removal of Members and, if any of the Members who were appointed on 20 September 2019 are unfit for continuance, the procedure for removal should be adopted. 22. Such an argument cannot be acceded to at the request of the Bar Association when the Members themselves have not moved this Court. Entertaining such a plea is fraught with consequences for the members whose term has not been extended. Some have applied afresh in the selection process which is under way. Moreover, the Court is not dealing with a situation of removal, but one in which the term of office as per the impugned notification dated 20 September 2019 has come to an end. The issue in regard to the term of appointment being less than the term prescribed statutorily has only been raised towards the tail end of the tenure and by the Bar Association and not the Members themselves. Entertaining the submissions of the petitioner would incidentally lead the Court into an evaluation of the suitability, character and performance of individual Members in a petition to which they are not parties. Such an exercise would, in the circumstances, be wholly inappropriate. 23. In Madras Bar Association (2020) (supra), the challenge was to the constitutional validity of the Tribunal, Appellate Tribunal and other Authorities (Qualification, Experience and Other Conditions of Service of Members) Rules, 2020, which mandated that the Members be appointed to the Tribunals for a maximum fouryear term or until they attain 65 years of age, whichever is earlier. Similarly, in Madras Bar Association (2021) (supra), the challenge was to Sections 12 and 13 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 and the amended Sections 184 and 186(2) of the Finance Act, 2017, which provided for a fouryear term to the concerned Tribunal, with a maximum age of 70 years for the Chairperson and 67 years for the Members. Rojer Mathew (supra) dealt with the provisions of the Schedule to the Tribunals Rules 2017 which had a shorter tenure of three years. In all these cases, the Court reiterated its position, as it had also held earlier in Union of India v. R. Gandhi (2010) 11 SCC 1, that Rules which prescribe a short tenure, coupled with provisions of routine suspensions pending enquiry and lack of immunity adversely impact the impartiality of the Tribunals. Furthermore, shorter tenures in such Rules also preclude the cultivation of adjudicatory experience. 24. In the present case, there is no challenge to the Rules or the provisions of the statute itself. The petitioners have instead sought an extension of the tenure of the retiring Members, who are not petitioning parties to the proceedings before this Court. The prayer for extension is also at a belated stage when the tenure of the Members is nearing its end. Not only had the Members consciously accepted the post for a duration of three years, the Selection Committee also already directed the government to take appropriate action basis the performance report. The Union Government has accordingly issued the notification dated 14 June 2020 extending the tenure of two judicial and six technical members. Furthermore, in the present circumstances, the selection process for fresh appointments of Members of the NCLT has already begun and is partially at an advanced stage. Accordingly, this Courts orders at the present stage would interfere with the selection process. 25. While the Notification dated 20 September 2019 prescribing a three year term was not in consonance with Section 413 of the Companies Act 2013, we note that: (i) the Members appointed under the notification failed to raise a challenge; (ii) a fresh process of selection has begun and some of the members have applied afresh; and (iii) the Union Government has taken corrective action to extend the tenure of certain members after considering the report of the President of the NCLT on their performance and suitability. 26. In the above backdrop, the appropriate course of action to be followed in the present case would be to allow the selection process which has been initiated to continue so that it can be concluded at an early date. The interest of the Bar Association which has moved these proceedings is that the vacancies in the Tribunal should be filled in on an expeditious basis so that work does not suffer and the functioning of the Tribunal is not hampered. The Bar Association cannot have a choice in regard to who should be a Member of the Tribunal.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. From the above narration, it appears that following the meeting of the Selection Committee on 20 April 2022, a report was obtained from the President of the NCLT about the work performance and suitability of 23 Members. The Selection Committee then opined that there was no specific provision which empowered it to consider the issue of revising the term of office of the Members of the NCLT. The Committee however observed that considering the sensitive nature of the functions and duties of the Members of the NCLT, and considering the verification reports bearing on the character, antecedents, performance and suitability of the Members, the Union government may take appropriate action in the matter.12. Pursuant to the above process, a notification was issued on 14 June 2022 by the Union government in the Ministry of Corporate Affairs by which approval was granted for revising the tenure of two Judicial Members and six Technical Members for a period of five years or till they attain the age of 65 in consonance with the provisions of Section 413 of the Companies Act 2013.19. Two facets of the supervening developments need to be recapitulated. First, the Selection Committee constituted for the appointment of Members of the NCLT has initiated the process of selection. The vacancies which are being processed for selection include those arising upon the end of the three-year term of the members who were appointed on 20 September 2019. In respect of one tranche of 15 Members, as the Court was apprised, the process of selection has been concluded by the Selection Committee and recommendations have been made. The appointment process shall be concluded within a period of four to six weeks. For the second tranche of 15 vacancies, a notification inviting applications has already been issued with 12 August 2022 being the last date for application. In this backdrop, the grant of any relief would interfere with the ongoing selection process.20. That apart, it is evident that when the incongruity in the term of office of three years was drawn to the attention to the Selection Committee chaired by the Chief Justice of India, a report was called from the President of the NCLT on the work performance and suitability of the Members. After the initial meeting of 20 April 2022, the Selection Committee at its meeting on 6 June 2022 adverted to the sensitive nature of the functions and duties of the Members, the verification carried out with regard to character and antecedents and the report on performance and suitability. The Union Government was, therefore, directed to take appropriate action. It is in pursuance of these minutes that the Union Government has issued a notification dated 14 June 2022 extending the tenure of two judicial and six technical members for a period of five years or until they attain the age of sixty-five.22. Such an argument cannot be acceded to at the request of the Bar Association when the Members themselves have not moved this Court. Entertaining such a plea is fraught with consequences for the members whose term has not been extended. Some have applied afresh in the selection process which is under way. Moreover, the Court is not dealing with a situation of removal, but one in which the term of office as per the impugned notification dated 20 September 2019 has come to an end. The issue in regard to the term of appointment being less than the term prescribed statutorily has only been raised towards the tail end of the tenure and by the Bar Association and not the Members themselves. Entertaining the submissions of the petitioner would incidentally lead the Court into an evaluation of the suitability, character and performance of individual Members in a petition to which they are not parties. Such an exercise would, in the circumstances, be wholly inappropriate.23. In Madras Bar Association (2020) (supra), the challenge was to the constitutional validity of the Tribunal, Appellate Tribunal and other Authorities (Qualification, Experience and Other Conditions of Service of Members) Rules, 2020, which mandated that the Members be appointed to the Tribunals for a maximum fouryear term or until they attain 65 years of age, whichever is earlier. Similarly, in Madras Bar Association (2021) (supra), the challenge was to Sections 12 and 13 of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 and the amended Sections 184 and 186(2) of the Finance Act, 2017, which provided for a fouryear term to the concerned Tribunal, with a maximum age of 70 years for the Chairperson and 67 years for the Members. Rojer Mathew (supra) dealt with the provisions of the Schedule to the Tribunals Rules 2017 which had a shorter tenure of three years. In all these cases, the Court reiterated its position, as it had also held earlier in Union of India v. R. Gandhi (2010) 11 SCC 1,  that Rules which prescribe a short tenure, coupled with provisions of routine suspensions pending enquiry and lack of immunity adversely impact the impartiality of the Tribunals. Furthermore, shorter tenures in such Rules also preclude the cultivation of adjudicatory experience.24. In the present case, there is no challenge to the Rules or the provisions of the statute itself. The petitioners have instead sought an extension of the tenure of the retiring Members, who are not petitioning parties to the proceedings before this Court. The prayer for extension is also at a belated stage when the tenure of the Members is nearing its end. Not only had the Members consciously accepted the post for a duration of three years, the Selection Committee also already directed the government to take appropriate action basis the performance report. The Union Government has accordingly issued the notification dated 14 June 2020 extending the tenure of two judicial and six technical members. Furthermore, in the present circumstances, the selection process for fresh appointments of Members of the NCLT has already begun and is partially at an advanced stage. Accordingly, this Courts orders at the present stage would interfere with the selection process.25. While the Notification dated 20 September 2019 prescribing a three year term was not in consonance with Section 413 of the Companies Act 2013, we note that:(i) the Members appointed under the notification failed to raise a challenge;(ii) a fresh process of selection has begun and some of the members have applied afresh; and(iii) the Union Government has taken corrective action to extend the tenure of certain members after considering the report of the President of the NCLT on their performance and suitability.26. In the above backdrop, the appropriate course of action to be followed in the present case would be to allow the selection process which has been initiated to continue so that it can be concluded at an early date. The interest of the Bar Association which has moved these proceedings is that the vacancies in the Tribunal should be filled in on an expeditious basis so that work does not suffer and the functioning of the Tribunal is not hampered. The Bar Association cannot have a choice in regard to who should be a Member of the Tribunal.