SC strikes down rules framed by center under Finance Act 2017 for tribunals

Kosha Doshi | Symbiosis Law School, Pune | 2nd April 2020

Roger Mathew v. South Indian Bank Ltd. & Ors. [ Civil Appeal No. 8588 of 2019; Supreme Court of India]

Facts-

            In 2017, a petition by Roger Mathew accompanied by the Revenue Bar Association confronted the provisions of the Finance Act, 2017 which governs the power and structure of diverse judicial tribunals such as National Green Tribunal and Income Tax Appellate Tribunal. The amendment provides power to appoint, remove and service condition of members of tribunals. This led to no delays in filling of vacancies. An argument also took place whether the Financial Act, 2017 could be passed as a money bill. 

            In February, 2018 the Supreme Court stayed part of the amendment where appointment would take place as per existing laws until the pleas were decided. A detailed insight into Part XIV of the Finance Act, 2017 was repealed which related to administration of 26 tribunals which were set up under various central laws. 

            An accusation of having committed fraud also came into light. A money bill is a provision consisting imposition of taxes and use of money drawn from the Consolidated Fund of India. The Rajya Sabha only has a namesake role in the passing of a money bill and suggestions made by it are not under an obligation to be followed. This led to a problem as the Finance Act was passed as a money bill without taking into consideration of Rajya Sabha’s recommendations and was enacted on 1^st April, 2017.  

            A major setback for the Government took place when the Supreme Court passed and order striking rules framed by the Centre under the Finance Act, 2017.  The order was passed on Wednesday 13^th November, 2019 by a 5 five-judge constitutional bench comprising the Chief Justice Rajan Gogoi, Justice N V Ramana, Justice D Y Chandrachud, Justice Deepak Gupta and Justice Sanjiv Khanna. The attorney general K K Venugopal put forth an argument that the court had no judicial review and no jurisdiction over a Lok Sabha speaker’s decision to pass the finance act as a money bill given under Article 110 of the Indian Constitution.

Issue:

The matter which formed a part of the case was regarding the validity of passing the finance act as a money bill.

Judgment:

The central government under Section 184 of Finance Act, 2017 is granted power to frame rules. Since the rules formulated by the Central Government were supplanting the parent enactment and not supplementing it, the Supreme Court struck it down in entirety. This validity is deemed to be sought by a larger bench. The 225- page judgment seeks to explain the difference between a finance and money bill. The government was ordered to regulate tribunals in accordance with the existing laws until the formulation of new ones. The appointments in tribunals will be in conformity with the current statutes and not under rules of the Finance Act, 2017.

            The bench issued a writ of Mandamus to the Ministry of Law to undertake a ‘Judicial Impact Assessment’ of all tribunals and to study the consequences of changes in the framework. This report was to be submitted after evaluation to the apex court. The case of R. Gandhi v. Union of India and key issues of Rojer Mathew v. South Indian Bank Limited were referred to while dispensing the judgment.

            A view stated that the new rules should ensure non-discrimination, uniformity in condition of providing services along with assurance of tenure. Further a clear distinction is to be made between the Chairperson and members appointed after retirement and the appointment by the Bar or appointment of specialized persons. The 2 categories ought to be separate and homogenous. The court decision also mentions an aspect of not providing Presiding Officers and members of the statutory tribunals the same status or rank as the judges of the Supreme Court or High Court only on basis of drawing equal salary. 

            The Central Government with assistance from the Law Commission or any other expert must within 6 months revisit the provision under the Finance Act, 2017. The amalgamation of the existing tribunal along with the remaining requiring homogeneity must be sought. They are required to then appoint sufficient number of benches based on the quantity of work existing and predicted. 

            The selection committee rules were not in accordance with the constitutional scheme as it would dilute the judiciary involvement. This case brought about an insight into how the executive encroached upon the judiciary by taking a dominant stand in the case. The case if not provided with the stated decision would have led to judicial independence being destroyed and imbalance in the separation of powers concept.