Legal Notes by Arvind Datar: Urgent course correction necessary for tribunals

The Supreme Court recently struck down the Tribunals Reforms Act, 2021 and underscored the need for a robust and independent tribunal system.

This was the eighth time that the Madras Bar Association had to question the validity of laws that seriously undermine the independence and functioning of tribunals. Tribunals are now an extremely important part of the justice delivery system. Over the years, the process of tribunalisation has expanded and now covers almost the entire commercial life of the nation. Today, tribunals cover company law, GST, central excise, customs, income-tax, electricity, telecommunication, environment, money laundering and debt recovery. Thus, it is vitally necessary that there is clear road map for the effective functioning of tribunals.  

Over the years, we have had two types of tribunals: first, those within the judicial system such as rent control, motor accident claims and industrial tribunals. The second category are quasi-judicial tribunals which perform a judicial function but are primarily controlled by the executive. The Income Tax Appellate Tribunal (ITAT) was the first Appellate Tribunal created in 1941. While it is currently fashionable to criticise our colonial legacy, it is interesting that the ITAT, from the start, was placed under the Ministry of Law to ensure its independence. This is one part of our colonial legacy that deserves to be restored. Sadly, almost all tribunals are now no better than departments of individual ministries; the Ministry of Finance controls the maximum number of tribunals.

It is unfortunate that the government fails to realise that the present system of appointments and tenure of members of various tribunals and the infrastructural support require urgent course correction. One fails to understand what the rationale in appointing members for just four years at a time is. The very purpose of a tribunal is to ensure that those manning them have specialised knowledge in the particular field of that tribunal and are thus able to effectively and quickly deal with the factual aspects of a dispute. Thus, a Company Law Tribunal must have members who have adequate working knowledge and experience of company law and are able to decide disputes arising under the Companies Act, 2013.

Under the current system, members are often appointed who may not have knowledge of the statute to which that tribunal applies. By the time they get a working knowledge of the subject, four years are over and it is time to retire. Even if members did not know the particular subject at the time of appointment, they are likely to acquire adequate domain expertise in the four-year period. Giving them an automatic extension of a further period of five years will ensure that the knowledge and experience gained in the first term is usefully applied to dispose cases expeditiously. Today, this acquired knowledge is completely lost. Indeed, it is necessary that there is an appointment for a minimum period of 10 years. It will be absurd to expect a person with no administrative experience to be appointed as a Collector for a period of four years and then ask him to retire. It will be equally absurd to appoint a person with little knowledge of income tax to function as a Commissioner of Income Tax for just four years. However, the government stubbornly refuses to grant longer tenures to members. The other unfortunate and very serious consequence of short tenures is integrity - a subject that no one wants to discuss.

The recent decision of the Supreme Court has recommended the formation of a National Tribunal Commission. This is a salutary recommendation and such a Commission need not even be a permanent body. The Commission can examine the functioning of various tribunals and make recommendations for their improvement. Indeed, there is a serious need to reconsider the closure of certain tribunals and send disputes back to the High Courts, as was correctly done in the case of the Intellectual Property Appellate Tribunal (IPAB).

For example, the National Company Law Tribunal (NCLT) now has exclusive jurisdiction over all issues arising under the Companies Act, 2013. However, the NCLT is reportedly overburdened with cases under the Insolvency and Bankruptcy Code, 2016. There is virtually very little time to deal with cases coming under Companies Act, 2013 – the very purpose for which the NCLT was created. It is time to consider whether the NCLT can be confined to deal with only insolvency cases, which have a fixed time limit of 330 days. Matters under company law can be sent back to the High Courts under the erstwhile company court system. Even the most ardent supporter of the tribunal system will agree that the older system of High Courts deciding company law cases was far better than the present system.

The rapid growth of tribunals started with the Company Law Board and Debts Recovery Tribunal. A quarter century has now passed and it is time to seriously reflect on the consequences of continuing the present faulty tribunal structure. From 1997, the Supreme Court has criticised, on more than one occasion, the functioning of tribunals. The 272^nd Report of the Law Commission (2017) has also found serious shortcomings in their working. Even the latest report titled ‘The State of Tribunals’ by DAKSH paints a grim picture. A properly designed tribunal system can greatly reduce the burden on courts, whereas the present system creates an extra burden on the High Courts and the Supreme Court.

No democratic country can expect to progress if its judicial system lacks credibility. The strength of every progressive nation is an independent judicial system and an equally independent tribunal system. The urgent necessity is to create tribunals with members having proper domain expertise, long tenure of service and adequate infrastructure. If we want to realise the dream of Viksit Bharat, we simply cannot continue our present tribunal system.