After Madras and Gujarat, now Bombay HC issues notice to Centre in challenge to Finance Act provisions on Tribunals

In a significant development, the Bombay High Court today issued notice to the Central government in a petition challenging Sections 156 to 189 of the Finance Act, 2017 and the Tribunal, Appellate and other Authorities (Qualifications, Experience and other conditions of Service of Members) Rules, 2017..The petition filed by Tax Friends Association was heard by a Bench of Chief Justice Manjula Chellur and Justice NM Jamdar..Senior Advocate Vikram Nankani and advocate Kunal Katariya appeared for the petitioners. They were briefed by Cogito Legal’s Partner Kunal Kanungo..Additional Solicitor General Anil Singh appeared for the Union government..The petitioner has challenged the manner of passage of the Finance Act by styling it as ‘money bill’. The petitioner has also decried the disregard by the Central Government of the Supreme Court decisions in framing the Act and the Rules alleging that many of the provisions are in complete disdain of apex court’s decisions..The Finance Act, 2017 was styled as money bill and passed by the Lok Sabha. Money Bills are those Bills, which exclusively contain provisions for imposition of taxes and appropriation of moneys out of the Consolidated Fund. Since, the Rajya Sabha can only suggest amendments to money bills, all suggestions made by Rajya Sabha regarding the Bill were junked by the Lok Sabha and the Act came into force on April 1, 2017..The petitioner has contended that Sections 156 to 189 of the impugned Act, which amend provisions relating to structuring and re-organisation of tribunals, are not matters relating to money bill and hence those matters could have been legislated only through separate legislations and bills and with the assent of Rajya Sabha..“When the Constitution gives a special provision for passing a Money Bill, it implies that bills unconnected with matters mentioned in Article 110 cannot be labelled as Money Bills. Such a practice amounts to Fraud on the Constitution and is a colourable exercise of power. This is a repeated practice as evidenced by the passing of the Insolvency and Bankruptcy Code, 2016 and the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016..It is settled law that abusing ordinance making power is a fraud played upon the Constitution. Likewise, deliberate use of Article 110 to circumvent the need of Rajya Sabha approval will be a fraud on the Constitution. Thus, the parliamentary process was abused by the Respondents to make amendments to the functioning of tribunals”.Further, Chapter VI of the Act empowers the Centre to make Rules relating to appointment, qualifications, terms of office and removal of Chairperson and members of Tribunal, which are generally prescribed under the relevant legislation establishing such tribunals. In pursuance of the same, the government has framed the Rules which has also been challenged by this petition..“It is submitted that the Impugned Rules suffer from severe infirmities with regards to doctrine of separation of powers and the independence of the judiciary that forms part of the basic structure of the Constitution..It is submitted that even though the Hon’ble Supreme Court has prescribed the various guidelines in the decision of R. Gandhi with regard to the constitution of the NCLT and NCLAT, the same stands applicable to all the tribunals in India. Respondent No. 1 while framing the Impugned Rules has not complied with the same, and has gone on to prescribe rules with regards to qualifications, appointments and removal of the members including the President/Chairperson etc., as the case may be, with total disregard to such guidelines and settled constitutional principles.”.The petitioner has specifically attacked Rules 7 and 8, which provide that retired judges of High Court and Supreme Court, who are appointed to tribunals, can be removed by Central government after a departmental inquiry. Terming it shocking, the petitioner has alleged that the same is violative of Article 50 which provides for separation of judiciary from executive..“ln several Tribunals, as per the parent act under which it was established, the removal of any member cannot be made unless there is an inquiry by a Judge of the Supreme Court and any removal of a member ought to have the concurrence of the Chief Justice of India. Shockingly’ the removal procedure under Rule 7 and 8 of the said Rules now contemplates an inquiry by a committee formed by the parent ministry under which the Tribunal functions and based on the findings and recommendation of such inquiry committee, the Central Government has the right to remove the member from the Tribunal..This effectively would mean, a High Court Judge who is a Chairperson or Vice President of the Tribunal can be removed by the Central Government after an inquiry by the parent ministry which is a complete breach of Article 50 which emphasizes that the State shall take steps to separate the judiciary from the executive in the public services of the State.”.Besides, the tenure of Presidents of all Tribunals have been reduced to three years, which according to the petitioner is in violation of the Supreme Court judgment in 2010 case of Union of India vs R Gandhi..The petitioner has prayed for quashing Sections 156 to 189 of the Finance Act, 2017 and the Finance Act, 2017 and the Tribunal, Appellate and other Authorities (Qualifications, Experience and other conditions of Service of Members) Rules, 2017 as unconstitutional..The Court issued notice and posted the case for further hearing on July 27, 2017..Earlier, the Madras High Court and Gujarat High Court had also issued notice to the Central government in similar challenge to Finance Act provisions.