Tag Archives: Tribunals

The problem with ‘tribunalisation’

Shift the oversight of tribunals from the government to the judiciary and reclaim the ground that constitutionally belongs to the latter
By Somasekhar Sundaresan
The has published a report titled “Assessment of Statutory Frameworks of Tribunals in India”. While the report is a response to five specific issues referred to the Commission by the last year, it promises to be a catalyst to a new debate on the legitimacy of the tribunal framework that has come to dominate justice delivery in India.

 

First, while repeated constitutional challenges to the creation of tribunals have met with mixed results, with the institution of tribunals largely being upheld (with tweaks to composition and manner of appointment), one fundamental issue has eluded proper consideration and debate. Under our constitutional framework, separation of powers among the executive (elected government), legislature (and state legislatures) and the judiciary is a vital fundamental feature of checks and balances in running the polity. However, although a large segment of the justice delivery has shifted from courts to tribunals, the latter are run by the (executive) and not the judiciary.

 

The manner of appointment of its members, performance appraisal, career path for tribunal members, remuneration, terms of service are all outside the oversight of the judiciary. This is the foremost problem with tribunalisation. Unless this issue is addressed, one would perpetually be faced with the main litigant before the tribunal being its administrative overseer, presenting an inherent and foundational conflict of interest. A judge, once appointed, can only be removed by through impeachment. That is a constitutional design to provide for judicial independence. That logic is turned on its head when members of the tribunal, including presiding officers who are invariably retired judges, are mere employees without any serious procedure for their removal. The breakdown of the separation of powers is potentially the most unconstitutional feature of the functioning of tribunals.

 

Second, with so many areas of jurisdiction being taken away from the high courts and moved to tribunals, a seriously unmindful long-term damage is being inflicted on the judiciary. The judiciary has been zealous in guarding its independence on appointment of judges but has not been so in guarding what judges get to do after appointment.  Legislation after legislation that confers a tribunal jurisdiction over a body of law contains provisions to oust jurisdiction of civil courts (for example, electricity tribunals or the Securities Appellate Tribunal). Appeals from such tribunals typically lie in the — on the rare occasion with another intermediate appeal in another appellate tribunal (for example, company law) — but clearly taking out the jurisdiction of high courts.

 

Therefore, what a judge gets to work on stands seriously denuded. Apart from civil disputes between parties, matters of serious commercial policy and regulatory implications get dealt with outside the precincts of high courts. The counterpoint would be that writ petitions challenging the constitutional validity of state or regulatory action can indeed be filed in high courts. However, the rare writ petition that gets filed in a high court, and the even rarer one that is actually considered by a in an area of law covered by a tribunal’s jurisdiction, would be the exception that proves the rule. The availability of the alternative efficacious remedy in the tribunal is the first ground that gets fought in such writ petitions, and that alone can take weeks, if not months, on end.

 

When a judge moves up to the and hears an appeal from decisions of these tribunals, she would have barely had a chance to consider these laws in her entire career as a judge. When she retires as a judge and potentially gets appointed as a presiding officer of one of these tribunals, she may have to start from scratch with a specialised area of law, negating the very objective of creating specialised tribunals.

 

In a nutshell, the grand constitutional scheme of conflict by design between the elected political legislature, the unelected bureaucrats in and the judiciary stands demolished. The legislature is happy to let the executive pilot legislation, eroding the space for real and independent justice delivery by bringing a substantial part of the mindshare of the judiciary under the direct oversight and indirect control of the executive government, ousting the jurisdiction of courts.

 

Finally, such an act of pulling of the rug from under the feet of the judiciary is not caused only by creating tribunals. The very creation of regulatory agencies and giving them quasi-judicial powers, again excluding jurisdiction of courts, is where the problem gets seeded. For example, civil courts have no jurisdiction over areas in which the Securities and Exchange Board of India (Sebi) has jurisdiction. The ouster is at two levels in the Act, 1992: Jurisdiction of the and that of the Securities Appellate Tribunal oust the jurisdiction of civil courts. The regulator has to convince no judge in taking action (indeed, a perverse incentive to even take ex parte actions with debilitating consequences) and no judge outside a tribunal can hear an appeal from such an action. After the tribunal, the is directly the forum for the last appeal.

 

Now, the trend is so pernicious that state legislatures have started passing legislation providing for appeals to the as a matter of right — in other words, states seek to task the apex court with judicial work, bypassing the high courts in having jurisdiction over state-level tribunals.

 

All of this points to a fundamental design breakdown. At this juncture, the Law Commission’s report (which is in the nature of recommendations) does provide fodder for contemplation. The recommendations largely and rightly focus on the important aspect of composition of the tribunals and who can man them. The Commission also speaks about a “single nodal agency under the aegis of the Ministry of Law and Justice” to oversee all tribunals.

 

However, the malaise is deeper and needs broader surgical intervention. It can only be corrected by shifting the oversight of tribunals from the executive to the judiciary and reclaiming the ground that constitutionally belongs to the judiciary as an arm of the state.

This post was published as my column titled Without Contempt in the Business Standard’s edition dated November 2, 2017

How lines of role clarity are getting blurred

By Somasekhar Sundaresan
The question of whether the Reserve Bank of India (RBI) can dictate terms to a quasi-judicial tribunal that presides over enforcement of loan recoveries is making news, with the Gujarat High Court asking how the central bank had the powers to regulate tribunals. That the RBI believed it could dictate terms to a quasi-judicial body is not important. What is important — rather, scary — is how easily role clarity can officially get mistaken in the running of our public institutions.

 

The foundational blunder that embeds wrong policy choice into the DNA and blurs role clarity is the Presidential that specially empowered the RBI to direct commercial banks on the action banks must take towards recovery of dues owed by borrowers. This is a classic example of a simplistic policy solution, which is an outcome of its authors presuming that everyone else before them had not been clever enough to see an obvious fix to a serious problem.

 

It is not the RBI’s job to take enforcement decisions for commercial banks. But having been given a cloak and a shining armour, the RBI perhaps came to believe that it could issue directions even to the National Company Law Tribunal on what it must do. Giving the RBI powers to direct banks on how to act under the newly-legislated Insolvency and Bankruptcy Code presumes that commercial banks were napping despite having been empowered by a new law. By vesting in the RBI the executive function of banks that it regulates, in other sectors, too, such interventions could follow. The insurance regulator could be asked to run insurance companies, the securities market regulator could be asked to operate mutual funds, and the pensions regulator may be asked to run pension funds.

 

Worse, the foundation has also been laid for vigilance agencies to knock on the doors of RBI officials, say, five years down the line, for bad decisions that were taken in the course of such enforcement. The banks’ problems will have become the RBI’s problems. This is a real possibility as the poor non-performing assets may provide next to no recovery, and buyers of some of these assets may make profits buying assets cheap — fertile ground for the Central Bureau of Investigation to say in the future that even the RBI has become tainted by corruption.

 

The RBI jumping in to notify a declaration on what the tribunal must do is also a replication of a classic policy choice in the past few years. The very creation of the National Company Law Tribunal, with powers to take serious judicial decisions such as award of damages as if it were a civil court, is based on the erroneous policy choice of creating new institutions to deal with problems that hurt the performance of existing institutions. Since justice administration is ineffective (due to myriad problems that cannot be reduced to populist reasons such as length of court vacations or lack of judges), successive governments have been getting to make empowering regulators to play the role of the  The requisite training and capacity building to discharge such roles are never invested in. Every disappointment with such experiments leads to even more egregious experiments, further blurring the lines of role clarity.

 

Examples abound. Sweeping powers given to capital markets regulator, the Securities and Exchange Board of India, despite being an executive organisation, to take serious quasi-judicial decisions without imparting judicial training, is a great example. Likewise, even the quasi-judicial tribunals that are being set up with serious responsibilities, face resource constraints. The National Company Law Appellate Tribunal is now empowered to play the role of an appellate tribunal not only for company law but also for competition law, as indeed in appeals from decisions under the new bankruptcy law.  However, the tribunal has just two members — one is a retired Supreme Court judge, the other a retired officer from audit and accounts service. One seat is lying vacant. The Securities Appellate Tribunal has been empowered to hear appeals against decisions of the insurance regulator, but it took forever for the government to even complete appointments to achieve a full bench.

 

When the alleged scam in the telecom sector was making news, many “creative” policymakers advocated involving the Comptroller and Auditor General in executive decision-making before a decision is made, so that the auditor does not later find fault with propriety of decision-making.  This was an example of how little inter-institutional checks and balances are appreciated and how easily they can get disrupted if the clamour for “change” gets loud enough to drown out reasoning.  Getting the banking regulator to take decisions that regulated banks must take on their own is in the same vein.

 

It is highly possible that sometime in the near future, desperation over capacity constraints in “insolvency professionals” not being able to cope with the burden imposed on them under the new bankruptcy law could lead to the Insolvency and Bankruptcy Board of India to being given powers to play the role of the professionals it regulates.  Nothing could be a bigger blunder in the gestation of a nascent ecosystem.  Such a measure would weaken the ecosystem of insolvency professionals, the same way commercial banks are being weakened today by having the RBI decide on their behalf how to handle bad loans.

 

In parallel, another role ambiguity is hurting the ecosystem. Under the new bankruptcy law, any operational creditor may initiate a “resolution process”, which, at the threshold, suspends the powers of the debtor’s entire board of directors, and imposes a moratorium on recovery of any dues from the debtor.  The abuse of this provision has begun in earnest. Instead of servicing the financial creditors whose firefighting needs the system’s support, the enforcement system is being clogged with anyone claiming Rs 1 lakh or more being able to hold all the financial creditors to ransom, to extract a settlement by threatening a snowballing effect of a moratorium. The pain of having the moratorium presents a perverse incentive to small operational creditors who can derail the financial creditors’ engagement with complex decisions, which can involve weighing recovery, enforcement, revival strategies and exit planning, all at once. Clearly, overzealous knee-jerk policy is only going to cause more problems, far from solving existing problems.

 

This Without Contempt column was published in the editions of Business Standard on July 13, 2017

It’s a tug-of-war out there

By Somasekhar Sundaresan
It is by far the boldest move in executive governments pushing the envelope in breaking the law with the very process of law-making. The current government has piloted the Finance Act, 2017, through to get substantial legal provisions passed without the scrutiny of the

 

Many appellate tribunals that hear appeals against orders by regulatory authorities have been wound up for being merged with other tribunals —essentially, changes in institutions that were set up in the first place, with the approval of both the and the Constitutional courts may be visited with challenges to the abuse.  But not much may happen there. The has an inbuilt check and balance in the office of the Speaker of the She has the last word on whether or not a proposed law is a Money Bill, that is, a law that deals with matters of finance and tax, as set out in the

 

The approach of the government is legally wrong. However, every wrong is not justiciable. If the set much store by the judgement of an occupant of high office, it was arguably intended that the occupant of that office must be trusted. If that trust is belied, it would only follow that we have a loophole in the that can only be corrected by a constitutional amendment.

 

It is equally true that courts have not always steered clear of every wrong that is not justiciable. Constitutional courts have happily legislated. Either entire legislation (for example, environmental charge for entry of vehicles into Delhi) including de facto contents of the (for example, the judges’ collegium for judicial appointments) have been created in the past by judge-made law. When facts are provocative enough, intervention may indeed follow.

 

In a challenge to the replacement of governors of states as political decisions, courts have ruled that no decision of the government, including a decision to replace a governor can be arbitrary, yet ruling that the decision cannot be interfered with. It is likely that the pending litigation over whether legislation that are nowhere near Money Bills can be passed by as if they were Money Bills, would meet the same fate.

This contrivance aimed at simply circumventing the has been resorted to in the past. The Foreign Exchange Management Act, 1999, had been passed by both Houses of as a non-criminal law to replace the dreaded criminal law contained in the Foreign Exchange Regulation Act, 1974. That was not a That had been a major milestone in India’s legislative and economic policy history. Two years ago, provisions criminalising exchange controls were brought into through a No consent of the was taken.

These infractions of law were not challenged since they were not politically correct for challenge. Now that a bigger gauntlet has been thrown, it is possible that some may challenge it.  The history of constitutional challenges to the creation of tribunals has itself had a chequered history at the hands of courts. The National Tax Tribunal could not be set up due to such a challenge.  The National Company Law Tribunal could indeed be set up although in its new form it is in conflict with earlier rulings of the Supreme Court rendered when dealing with earlier attempts to set up the Tribunal. There are as many views on interpreting the as there can be benches of the Supreme Court and of multiple high courts.

All of this is not to say that all the changes sought to be brought in are bad. There are some laudatory amendments — one is the retirement age of the presiding officer has been extended to 70 years. Some changes are horrible.  The tribunals listed in the Finance Act, 2017, are not the only ones whose has been disturbed. A provision entitling government to similarly merge other tribunals not named for now, by a simple executive fiat has also been passed as a part of the

 

The Finance Act, 2017, is a quiet power-grab in the conflict between arms of the state.  If the judiciary wrested control back by striking down the National Judicial Appointments Commission, the executive has sought to strike back by giving itself powers over vast areas of quasi-judicial territory.

This is the most vulnerable part of the Finance Act, 2017, since it could be struck down as being arbitrary as it is a matter of “excessive delegation” of powers by the legislature to the executive. A constitutional challenge to such delegation is not about whether it is a Even if it were to be regarded as a provision in a Money Bill, it would be liable to be attacked as an arbitrary delegation of power to the government.
A version of this post was published as my Without Contempt column in the Business Standard in its editions dated April 6, 2017