Thursday, May 20, 2010

NCLT Constitutionality Case: Preliminary Thoughts

The Supreme Court’s decision dated May 11, 2010 in the case of Union of India v. R. Gandhi [MANU/SC/0378/2010] is striking for at least two reasons.

In this case, the court considered the constitutional validity of the Companies (Second Amendment) Act, 2002. In its unanimous opinion authored by Justice Raveendran, the court held that the Act which created the National Company Law Tribunal and National Company Law Appellate Tribunal has unconstitutional “defects”, which are capable of being “cured” by suitable amendment (presumably a reference to the doctrine of eclipse). However, the decision is striking for at least two reasons:

First, in emphasizing the importance of the composition of the members of the tribunal, viz. the manner of their appointment, and their qualifications, this decision continues the court’s repeated emphasis on procedural due process: i.e. not on the substance of a decision, but on the manner in which a decision is reached. The decision is founded on the philosophy that creating the appropriate procedural machinery creates the appropriate setting for substantive decisions. In its emphasis on fair process, i.e. on the institutional makeup of the tribunal, this decision emphasizes procedural due process. In this sense, this decision merely continues the traditions of “fair, just and reasonable” process, emphasized most prominently since (although the emphasis did not begin with) Maneka Gandhi’s case in 1978. The court in R Gandhi's case articulated a “right to adjudication by an independent forum”.

Second, the court emphatically held in this case that the basic structure theory could not be applied against ordinary legislation. It was argued that principles such as rule of law, separation of powers, and independence of the judiciary were violated by the Amending Act, and that the law was therefore unconstitutional. The court rejected this argument. However, it found that principles such as rule of law, separation of powers and independence of the judiciary could nonetheless be applied against legislation, since they could as easily be sourced through provisions of the constitution, notably the “essence of equality”. This case highlights very well the expansion of "equality", a trend which began in the late 1970s. However, since the case of S.R. Bommai, this is perhaps one of the most prominent decisions where the basic structure theory has been used in an analysis not concerning constitutional amendments, although the court refuses to term its analysis as such.
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