Summary
The NCLT Bar Association challenged a notification of 20 September 2019 under Article 32. The notification appointed Members of the NCLT for three years, although Section 413(1) of the Companies Act, 2013 prescribes a five-year term. The Supreme Court held that the three-year term was not in line with Section 413. It nevertheless declined relief. The appointees had accepted the three-year term and never challenged it. A fresh selection process was under way and some of them had applied again. The Union had already extended the tenure of eight Members after the Selection Committee considered performance reports. The Court directed that future NCLT appointments must follow Section 413. The petition was disposed of without disturbing the extension notification.
Issues
- Whether appointment of NCLT Members for a three-year term is consistent with Section 413(1) of the Companies Act, 2013.
- Whether, at the Bar Association's instance, the Court should direct that the terms of all Members appointed under the 2019 notification be enlarged to five years, when the Members themselves had not objected.
Provisions considered
- Section 413(1) and (2)(b), Companies Act, 2013A Member of the NCLT holds office for five years, may be reappointed for another five, and retires at 65. A three-year appointment by administrative notification is not contemplated, and future appointments must follow the statute. (¶¶ 2, 15, 17, 25, 27)
- Section 417, Companies Act, 2013The Association argued that Members found unfit should be removed under this section. The Court rejected the argument because the case concerned the expiry of a term, not removal. (¶¶ 21, 22)
- Article 32, Constitution of IndiaRelief was declined in the exercise of discretion because of the supervening developments and because the affected Members were not before the Court. (¶¶ 18, 19, 22, 24, 26)
Held
- Section 413(1) does not contemplate appointing NCLT Members for three years. An administrative notification of appointment must conform to the statute governing the Tribunal, so the 2019 notification was not consistent with Section 413. (¶¶ 17, 25)
- Relief was declined. The appointees had accepted the three-year term and raised no challenge. The issue was raised only near the end of their tenure, and by the Bar Association rather than the Members. Selection for the resulting vacancies had begun and some appointees had applied again, so relief would interfere with that process. (¶¶ 19, 22, 24, 25)
- Entertaining the plea would draw the Court into evaluating the suitability, character and performance of individual Members who were not parties. Such an exercise would be wholly inappropriate. The Bar Association's legitimate interest is that vacancies be filled quickly; it has no say in who should be a Member. (¶¶ 22, 26)
- Unlike Madras Bar Association, Rojer Mathew and R. Gandhi, no rule or statute fixing short tenures was under challenge here. The petition sought only an extension of tenure for non-party Members. (¶¶ 23, 24)
Result
Writ petition disposed of. The prayer to enlarge all the 2019 appointees' terms to five years was declined, without affecting the Union's notification extending the tenure of eight Members. The Union was directed to follow Section 413 in future NCLT appointments.