In this article, Shretima Bagri discusses National Company Law Appellate Tribunal (NCLAT) taking over Competition Appellate Tribunal (COMPAT).

Introduction

As per a recent amendment, the Competition Appellate Tribunal (COMPAT) has ceased to w.e.f May 26, 2017. The appellate function under the Competition Act, 2002 (Competition Act) would now confer to the National Company Law Appellate Tribunal (NCLAT). These amendments were brought about under the provisions of Part XIV of Chapter VI of the Finance Act, 2017.

Accordingly, Sections 2(ba) and 53A of the Competition Act and Section 410 of the Companies Act, 2013 (CA 2013) have been appropriately amended and various other provisions of the Competition Act dealing with the COMPAT have been omitted. Further, Section 417A has been introduced in the CA 2013 and deals with the qualifications, terms and conditions of service of the Chairperson and Members of the NCLAT.

The government has moved amendments to the Finance Bill in order to facilitate the changes. Further, the Copyright Board would be dissolved, too, and its functions would be taken over by the Intellectual Property Appellate Board. The National Highways Tribunal would be replaced and its functions would be taken over by the Airport Appellate Tribunal.

In the case of Employees Provident Fund Appellate Tribunal, its function would be taken over by the Industrial Tribunal. There will be transitional provisions for the tribunals being replaced.

The chairpersons, vice-chairpersons, chairmen, or other members who are currently occupying posts with tribunals to be merged will be entitled to receive up to three months’ pay and allowances for premature termination of their office term. Officers and other authorities of tribunals that will cease to exist after the merger will stand reverted to their parent cadre, ministries or departments.

Amendments to the Finance Bill, 2017, propose that the central government may make rules to provide for the qualifications, appointments, term of office, salaries and allowances, resignation, removal, and other conditions of service for these members. These rules will be applicable to members, including the chairperson, vice-chairpersons and members, among others, of specified tribunals, appellate tribunals and other authorities.

The amendments state that the term of office for these persons will not exceed five years and that they will be eligible for reappointment. Further, the age of retirement for these persons has been specified, such as 70 years for chairpersons, chairmen or presidents, and 67 years for vice-chairpersons, vice-chairmen, vice-presidents, and presiding officers.

Some of the major objectives of The Finance Bill, 2017 are as follows:

• To minimise the number of tribunals, the Finance Bill, 2017 sought to merge eight tribunals with other tribunals and amended provisions relating to the structuring and re-organization of such tribunals.
• The above measures were sought to be taken through a money bill, which is only supposed to contain provisions for imposition of taxes and withdrawal of money from the State Treasury.

The Process

• The Finance Bill, 2017 received Presidential Assent on 31 March 2017 becoming the Finance Act, 2017. The Ministry of Finance notified that the relevant provisions regarding the merger of tribunals would come into force on 26 May 2017.
• Subsequently, in exercise of the rule-making power conferred by the Finance Act, 2017, the Ministry of Finance also notified the rules which would govern the appointments, tenure and other condtitions of service of chairpersons and members of the merged tribunals.
• As a result of the above exercise, the Competition Appellate Tribunal, which until recently was the primary appellate authority for decisions from the Competition Commission of India (CCI), was merged with the National Company Law Appellate Tribunal (NCLAT).
• Soon after the notification of the Finance Act, 2017, media reports suggested that it raised concerns about the separation of powers and the independence of the judiciary in certain areas. A judicial challenge seemed to be in the works.

Effects

• There will be a transition phase during which all pending matters before the COMPAT stand transferred to the NCLAT. During this period, all such matters will be heard afresh by the NCLAT.
• There is also a perceived lack of clarity regarding the manner and the timelines in which these transferred matters will be dealt with by the NCLAT, given that the NCLAT is already burdened with adjudication of appeals arising out of the NCLT as well as the IBBI. This brings to the fore concerns about whether the administrative machinery of the NCLAT is equipped to deal with the additional authority that has now been assigned to it.
• In order to deal with the additional responsibility of adjudicating appeals under the Competition Act, it may be helpful to now increase the number of members of the NCLAT.
• The NCLAT may also have multiple Benches, including a dedicated Bench for matters under the Competition Act. Amendments to the Rules, bringing them in tune with the Competition Act would go a long way in easing procedural formalities.

Writ Petition challenging the merger

The merger was challenged by a writ petition filed in the High Court of Madras by the Madras Bar Association, an association of lawyers which has considerable experience in advocating such causes. The Ministry of Finance and Ministry of Law have been impleaded as respondents.

The primary contentions laid down in the writ petition are as follows:

• Section 156 to 189 (the relevant provisions regarding the merger of tribunals) of the Finance Act, 2017 are ultra vires Article 14, Article 50 and Article 110 of the Constitution of India (Constitution).
• The Conditions of Service Rules are unconstitutional as they violate the principles of separation of powers and the independence of the judiciary, which form part of the basic structure of the Constitution.
  Significantly, the petitioners also submitted that the impugned provisions of the Finance Act, 2017 and the Conditions of Service Rules are contrary to certain directions issued by the Supreme Court in Union of India v. R Gandhi when hearing a similar challenge regarding the establishment of the National Company Law Tribunal and the NCLAT.
• Further, the petitioner contended that the passing of the impugned provisions in the Finance Act, 2017 as a money bill constitutes “colourable exercise of power”.

The matter reportedly came up for hearing at the High Court of Madras. A notice has been issued to the Central Government and next hearing is scheduled for 27 June 2017. No interim orders have been passed by the High Court of Madras, as yet.

As the institutions enforcing the Competition Act, 2002 face judicial challenges, it will be imperative for the Central Government to ensure that the above judicial challenges are met appropriately so as to further the cause of justice with minimal interference with the on-going functioning of the authorities.