Typically, during every Budget session, Parliament passes a Finance Bill which details the tax proposals of the central government. This year, in addition to tax proposals, the Finance Bill 2017 contained several amendments that made structural changes to 26 tribunals. There are three broad issues with these amendments, including whether they will affect the independence of tribunals, and if they should have been brought in through the route of the Finance Bill.
Currently, the Acts that set up a tribunal also contain provisions of qualifications for appointment, term of office, and removal of its members. The amendments in the Finance Bill, 2017 have modified these conditions of service of 19 tribunals that are currently in place. The amendments permit the central government to decide the terms of service including appointments, term of office, salaries and allowances, and removal of tribunal members through rules. Rules are framed by the central government, under a particular Act, and undergo post facto scrutiny by Parliament. In contrast, a Bill is examined and debated by Parliament before its passage. By allowing the government to determine the appointment, reappointment and removal of members through rules, the threshold of Parliamentary scrutiny of these provisions is being lowered.
Further, tribunals perform a judicial function, while the government is part of the executive. There may be instances where the government is a party to a dispute before a tribunal like the Central Administrative Tribunal (CAT) or the Income Tax Appellate Tribunal (ITAT). There would be conflict of interest if the government were to be a litigant before the tribunal as well as have the power to determine appointment or reappointment of its members. By allowing the central government to frame rules to decide each of these aspects, the independence of tribunals could be affected.The Supreme Court had examined the issue of reappointments of members of the National Tax Tribunal (NTT) in 2014. It had held that appellate tribunals have similar powers and functions as that of High Courts, and hence matters related to their members’ appointment and reappointment must be free from executive involvement. It reasoned that a member of the tribunal may be constrained to decide matters in a manner that would ensure his reappointment.
Note that, currently, there is already a Bill pending in Parliament since 2014, which seeks to ensure uniformity in conditions of service across 26 tribunals, appellate tribunals and other authorities. The Bill amends the parent Acts of each of the 26 tribunals. While the amendments to the Finance Bill, 2017 are delegating appointment and removal functions to the rules, the 2014 Bill has retained these provisions in the parent Act. The 2014 Bill has also been examined by a Parliamentary Standing Committee, which agreed that tribunals must be free from executive involvement.
Additionally, the amendments to the Finance Bill, 2017 have done away with seven existing tribunals such as the Airports Economic Regulatory Appellate Authority (AERA). Functions of these tribunals have been transferred to existing tribunals. For example, the functions of the AERA have been transferred to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). This implies that TDSAT will now also have to decide upon matters related to pricing of airport services. The question is whether the TDSAT has the technical competence to deal with such diverse issues. Similarly, it is unclear if the National Company Law Appellate Tribunal, which will replace the Competition Appellate Tribunal, will have the expertise to deal with matters related to anti-competitive practices.Since all of these structural changes to tribunals have been brought in through the Finance Bill, 2017, which is a Money Bill, Rajya Sabha will have a limited role. The Upper House may only make recommendations which are non-binding, and if not returned within 14 days, the Bill will be deemed to be passed by Parliament.
The proposed amendments have also not been subjected to the rigour and scrutiny of a Parliamentary Standing Committee before its passage. Going forward, it remains to be seen if these provisions will be challenged based on the Supreme Court’s 2014 decision that sought to ensure that tribunals are free from executive involvement.