Members cannot be appointed part-time to Fema Tribunal

Rule 2 (1) (b) provides the qualification to be a Member. Needless to say, the same is in total accord with the Act. The first proviso to Rule 5 introduces part time Member. We have held that the said proviso, as far as it introduces the concept of part time Member, is contrary to the provision contained in the enabling Act. Section 46 of the Act nowhere envisages about the part time Members.

The second proviso, we have already mentioned, is an innovative one. Thereafter, we have at length referred to the qualifications for a person to be a Member who is eligible to be a district judge. Once we have held that there cannot be a part time Member, a person who is qualified to be a district judge can be a Member if he meets the criterion laid down in the pronouncements of this Court. They are strictly followed. We really perceive no justification for the introduction of the second proviso to bring in officers from the Indian Legal Service who are qualified to become district judges to be part time Members. If the officer satisfies the requisite qualification, he can be appointed as a Member. Therefore, in our  consideration, the second proviso has been incorporated to bring in only part time Members and  once the introduction of part time Members is treated to be ultra vires the Act, the rest part of the  Rule is absolutely redundant. To repeat at the cost of repetition, if the officer belonging to Indian  Legal Services is qualified to be a district judge, he can compete and be selected for the post of Member and that qualification is to be in accord with the pronouncements of law of this Court.

The High Court, as we find, had quashed the appointment of part time Members and the appointment of Chairperson who was a part time Member once. As the appointment of part time Member was quashed, as a logical corollary, such a person could not be allowed to be appointed to the post of Chairperson. To elaborate; the disqualified Member cannot hold the post of a Chairperson as a stop gap arrangement. Thus, we do not find any error in that regard in the judgment passed by the High Court.

At this juncture, we are obliged to clarify the position further. This Court while issuing notice had granted stay on the operation of the judgment. We have been apprised by Mr. Bhatt that the Central Government, at present, has been scrupulously following the mandate of the Act and only qualified persons are appointed as Members and Chairperson. To avoid any confusion, we clarify that the judgments and orders passed by the Appellate Tribunal by the Chairperson or Members who were not qualified and whose appointments have been quashed shall not be treated to be null and void. In this regard we may refer with profit the decisions in Gokaraju Rangaraju v. State of Andhra Pradesh [AIR 1981 SC 1473] and M.M. Gupta and others v. State of J. & K. and others [AIR 1982 SC 1579] wherein this Court, while quashing the appointments of the respondents, had clarified that the orders and judgments delivered by them during the period they had continued to function as district judges on the basis of invalid appointments could not be rendered as legally invalid and void. In the larger interest of justice, they are treated as valid and binding. Relying on the said dictum, we clarify the position accordingly.

SUPREME COURT OF INDIA

(DR. B.S. CHAUHAN & DIPAK MISRA, JJ.)

Union Of India And Others V/s.  S. Srinivasan

Union Of India And Others V/s. Saroj Kumar Shukla And Others

Civil Appeal No. 3185 of 2005 with Civil Appeal Nos. 3186-3190 of 2005-Decided on 21-05- 2012.

FEMA – Appellate Tribunal – Part Time Chairman/Member

JUDGMENT

Dipak Misra, J.-Calling in question the legal penetrability of the order dated April 12, 2004 passed by the Division Bench of the High Court of Judicature of Delhi in Writ Petition Nos. 7606 of 2003, 1335, 1336, 1337, 1344 and 1345 of 2004 by a common judgment, the present batch of appeals by way of special leave under Article 136 of the Constitution has been filed.

2. Though prayers in different writ petitions were couched differently, yet the three basic reliefs  which were sought before the High Court are – Rule 5 of the Appellate Tribunal for Foreign  Exchange (Recruitment, Salary and Allowances and Other Conditions of Service of Chairperson  and Members) Rules, 2000 (hereinafter referred to as ‘the Rules’) is ultra vires the Foreign  Exchange Management Act, 1999 (for brevity ‘the Act); for quashment of certain notifications  issued by the Government of India, Ministry of Law, Justice and Company Affairs, appointing  part time Members of the Appellate Tribunal by issue of a writ of quo warranto as they did not  satisfy the eligibility criteria as stipulated in the Act; and further to quash the appointment of respondent No. 3 to act as the Chairperson as he was a part time Member and also was not  eligible to hold the post. 3. It was urged before the High Court that the Rule travels beyond the scope and ambit of the Act and, in fact, directly runs counter to the provisions in the Act and, therefore, deserves to be declared as ultra vires. It was canvassed that when the Act did not conceive of part time Members, even a person meeting the eligibility criteria could not be appointed as a part time Member. It was further propounded before the High Court that a part time Member who was disqualified to hold the post could not have been allowed to act as the Chairperson as that would destroy the spirit of the Act. To bolster the said submissions, the petitioners before the High Court placed reliance on Chander Mohan v. State of Uttar Pradesh and others [(1967) 1 SCR 77], Shri Kumar Padma Prasad v. Union of India and others [(1992) 2 SCC 428] and State of Maharashtra v. Labour Law Practitioners’ Association and others [(1998) 2 SCC 688].

4. The contentions raised by the petitioners before the writ court were resisted by the respondent  on the ground that the Members of Indian Legal Services were only required to hold the post of part time Member and, therefore, the rule does not really run counter to the Act in question; that  as a stopgap arrangement, a part time Member could be appointed as the Chairperson of the  Appellate Tribunal and hence, no facet could be found fault with such an appointment; and that a  writ of quo warranto could not be issued as the persons, who were meeting the eligibility criteria  had been appointed by a High Level Committee. Reliance was placed on the decision in Union of India and another v. Delhi High Court Bar Association and others [(2002) 4 SCC 275].

5. The High Court declared the first and second proviso to Rule 5 of the Rules as ultra vires Section 21(1 )(b) of the Act and quashed the appointments of respondent Nos. 3 and 4 who were appointed as part time Members and further quashed the appointment of respondent No. 3 as the acting Chairperson of the Appellate Tribunal. 6. We have heard Mr. R.P. Bhatt, learned senior counsel appearing for the appellants, and Mr. Mahabir Singh, learned senior counsel appearing for the contesting respondent.

7. The Parliament enacted the Foreign Exchange Management Act, 1999 repealing the Foreign Exchange Regulation Act, 1973 as a result of which the Appellate Board constituted under Section 52 of the 1973 Act stood dissolved. Thereafter, the new Appellate Board was to be constituted and, accordingly, it was constituted. Regard being had to the principal issue whether the Rule runs contrary to the main provision, it is condign to refer to Section 20 of the Act which deals with the composition of the Appellate Tribunal. It reads as under: –

“20. Composition of Appellate Tribunal.-

(1)      The Appellate Tribunal shall consist of a Chairperson and such number of Members as the Central Government may deem fit.

(2)   Subject to the provisions of this Act, –

(a)   the jurisdiction of the Appellate Tribunal may be exercised by Benches thereof;

(b)   a Bench may be constituted by the Chairperson with one or more Members as the Chairperson may deem fit;

(c)   the Benches of the Appellate Tribunal shall ordinarily sit at New Delhi and at such other places as the Central Government may, in consultation with the Chairperson, notify;

(d)   the Central Government shall notify the areas in relation to which each Bench of the Appellate Tribunal may exercise jurisdiction.

(3) Notwithstanding anything contained in sub-section (2), the Chairperson may transfer a Member from one Bench to another Bench.

(4) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit.”

On a perusal of the aforesaid provision, it is quite clear that the Appellate Tribunal shall consist of Chairperson and such number or Members as the Central Government may deem fit.

8. Section 2(s) defines a Member as follows: –

““Member” means a Member of the Appellate Tribunal and includes the Chairperson thereof;” On a studied scrutiny of the aforesaid provision, it is manifest that there is no conception of a part time Member under the scheme of the Act.

9. At this juncture, it is profitable to refer to Section 21 of the Act that provides for qualification for appointment of Chairperson, Member and Special Director (Appeals). Regard being had to the controversy, it is apt to reproduce the provision in entirety: –

“21. Qualifications for appointment of Chairperson, Member and Special Director (Appeals) –

(1) A person shall not be qualified for appointment as the Chairperson or a Member unless he –

(a)      in the case of Chairperson, is or has been, or is qualified to be, a Judge of a High Court; and

(b)      in the case of a Member, is or has been, or is qualified to be, a District Judge.

(2) A person shall not be qualified for appointment as a Special Director (Appeals) unless he –

(a)    has been a member of the Indian Legal Service and has held a post in Grade I of that Service; or

(b)   has been a member of the Indian Revenue Service and has held a post equivalent to a Joint Secretary to the Government of India.”

10. On a scanning of the aforesaid provision, it is quite clear that a person, in order to be qualified for appointment as the Chairperson, is required to be or has been qualified to be a Judge of the High Court and a person to be a Member is required to be or has been qualified to be a district judge and to be appointed as a Special Director (Appeal), he has to be a member of the Indian Legal Service and is required to have held a post of Grade I or that service or a member of the Indian Revenue Service as a post equivalent to Joint Secretary to the Government of India. Thus, a member of the Indian Legal Service who is qualified as per Section 21 (2) (a) is entitled to be appointed as a Special Director (Appeal).

11. Section 16 of the Act provides for appointment of the Adjudicating Authority. Section 17 provides for appeal to the Special Director (Appeals). Section 18 provides for establishment of the Appellate Tribunal to hear the appeals against the order of the Adjudicating Authorities and the Special Director (Appeals) under the Act. Section 19 provides for appeal to the Appellate Tribunal and lays down the postulates as to what categories of appeals can be preferred. From the aforesaid provisions, it is quite inclined that there are three distinctive forums for adjudication and there is a hierarchical system. We have already referred to Section 20 which deals with the composition of the Appellate Tribunal. As is indicated hereinabove, Section 21(1) clearly lays a postulate as to what is the qualification for a Chairperson and that of a Member. Sub-section (2) of Section 21 provides for the qualification of a Special Director (Appeals). At this juncture, we may refer to Section 46 which provides for the rule making power. It stipulates that the Central Government by notification makes rules to carry out the provisions of the Act. Section 46(2) states the nature of the rules to be framed by the Central Government. We think it appropriate to reproduce Section 46 of the Act as under: –

“46. Power to make rules –

(1)      The Central Government may, by notification, make rules to carry out the provisions of this Act.

(2)      Without prejudice to the generality of the foregoing power, such rules may provide for, —

(a)     the imposition of reasonable restrictions on current account transactions under section 5;

(b)      the manner in which the contravention may be compounded under sub-section (1) of section 15;

(c)      the manner of holding an inquiry by the Adjudicating Authorities under sub-section (1) of section 16;

(d)      the form of appeal and fee for filing such appeal under sections 17 and 19;

(e)      the salary and allowances payable to and the other terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal and the Special Director (Appeals) under section 23;

(f)    the salaries and allowances and other conditions of service of the officers and employees of the Appellate Tribunal and the office of the Special Director (Appeals) under sub-section (3) of section 27;

(g)    the additional matters in respect of which the Appellate Tribunal and the Special Director (Appeals) may exercise the powers of a civil court under clause (i) of sub-section (2) of section 28;

(h)   the authority or person and the manner in which any document may be authenticated under clause (ii) of section 39; and (i) any other matter which is required to be, or may be, prescribed.”

12. Emphasis has been laid on the rule making power by Mr. Bhatt, learned senior counsel, to build an edifice that there lies the source for framing the rules which has been erroneously declared by the High Court to be ultra vires.

13. At this juncture, we may refer with profit to Rule 2(1)(b) which reads as follows:-

“2. Qualification for recruitment –

(1) A person shall not be qualified for appointment as Chairperson or a member unless he : –

(a)    xx xx xx

(b)   in the case of a Member, is or has been or is qualified to be a District Judge.”

Rule 5 of the Rules reads as follows:-

“Composition – The Appellate Tribunal shall have one Chairperson and Members not exceeding four: Provided that the number of either full time Members or part time Members shall not exceed two; Provided further that the part time Members shall be appointed from amongst officers belonging to the Indian Legal Service who fulfil the qualifications prescribed under clause (b) of sub- rule (1) of Rule 2 of these rules.”

“….. Before a rule can have the effect of a statutory provision, two conditions must be fulfilled, namely (1) it must conform to the provisions of the statute under which it is framed; and (2) it must also come within the scope and purview of the rule making power of the authority framing the rule. If either of these two conditions is not fulfilled, the rule so framed would be void.”

“13. It is very common for the legislature to provide for a general rule making power to carry out the purpose of the Act. When such a power is given, it may be permissible to find out the object of the enactment and then see if the rules framed satisfy the test of having been so framed as to fall within the scope of such general power confirmed. If the rule making power is not expressed in such a usual general form then it shall have to be seen if the rules made are protected by the limits prescribed by the parent act… ”

21. In St. Johns Teachers Training Institute v. Regional Director [AIR 2003 SC 1533], it has been observed that a regulation is a rule or order prescribed by a superior for the management of some business and implies a rule for general course of action. Rules and Regulations are all comprised in delegated legislation. The power to make subordinate legislation is derived from the enabling Act and it is fundamental that the delegate on whom such a power is conferred has to act within the limit of authority conferred by the Act. Rules cannot be made to supplant the provisions of the enabling Act but to supplement it. What is permitted is the delegation of ancillary or subordinate legislative functions, or, what is fictionally called, a power to fill up details.

“It is now a well-settled principle of law that the rule-making power “for carrying out the purpose of the Act” is a general delegation. Such a general delegation may not be held to be laying down any guidelines. Thus, by reason of such a provision alone, the regulation-making power cannot be exercised so as to bring into existence substantive rights or obligations or disabilities which are not contemplated in terms of the provisions of the said Act.”

23. In the said case, while discussing further about the discretionary power, delegated legislation and the requirement of law, the Bench observed thus:-

“The image of law which flows from this framework is its neutrality and objectivity: the ability of law to put sphere of general decision-making outside the discretionary power of those wielding governmental power. Law has to provide a basic level of “legal security” by assuring that law is knowable, dependable and shielded from excessive manipulation. In the contest of rule-making, delegated legislation should establish the structural conditions within which those processes can function effectively. The question which needs to be asked is whether delegated legislation promotes rational and accountable policy implementation. While we say so, we are not oblivious of the contours of the judicial review of the legislative Acts. But, we have made all endeavours to keep ourselves confined within the well-known parameters.”

24. In this context, it would be apposite to refer to a passage from State of T.N. and another v. P. Krishnamurthy and others [(2006) 4 SCC 517] wherein it has been held thus:-

“16. The court considering the validity of a subordinate legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute. Where a rule is directly inconsistent with a mandatory provision of the statute, then, of course, the task of the court is simple and easy. But where the contention is that the inconsistency or non-conformity of the rule is not with reference to any specific provision of the enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity.”