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Sec 6A Of The Delhi Special Police Establishment Act Cannot Be Applied Retrospectively: Supreme Court

Case title: CBI Vs R.R Kishore

Case no.: Criminal Appeal No.377 Of 2007

Decided on: 11.09.2023

Quorum: Hon’ble Justice Sanjay Kishan Koul, Hon’ble Justice Sanjiv Khanna, Hon’ble Justice Abhay S. Oka, Hon’ble Justice Vikram Nath, Hon’ble Justice J.K Maheshwari.

 

Hon’ble Justices stated that “once a law is declared to be unconstitutional, being violative of Part-III of the Constitution, then it would be held to be void ab initio, still born, unenforceable and non est in view of Article 13(2) of the Constitution and its interpretation by authoritative pronouncements. Thus, the declaration made by the Constitution Bench in the case of Subramanian Swamy will have retrospective operation. Section 6A of the DSPE Act is held to be not in force from the date of its insertion i.e. 11.09.2003.”

BRIEF FACTS:

The story begins with the CBI registering an FIR against a Radiologist for offences under the Prevention of Corruption Act, 1988. Later they laid a trap and the radiologist is said to have accepted a bribe. A charge sheet was filed and before the Special Judge and the Radiologist filed a discharge petition. The main contention in that petition was that the trap which was a part of the enquiry/investigation had been laid without the previous approval of the Central Government as provided under Section 6A of the Delhi Special Police Establishment Act, 1946. Though the Special Judge rejected this discharge plea, the High Court of Delhi allowed his revision petition and held that the CBI acted in contravention of Section 6A DSPE Act. Against this judgment, the CBI approached the Apex Court.

During the pendency of this appeal, the constitution bench judgment Subramanian Swamy vs. Director, Central Bureau of Investigation was delivered, which held that  Section 6A(1) of the DSPE Act was held to be invalid.

So when the appeal came up before the bench again, the CBI contended that Section 6A(1) has been declared to be unconstitutional,  the judgment of the High Court deserves to be set aside and the prosecution should be allowed to continue with the proceedings from the stage of rejection of discharge application. In other words, the CBI contended that the Constitution bench judgment striking down Section 6A would have retrospective effect. On the other hand, the accused contended that this judgment could not have any retrospective operation. The court has placed this case before the constitutional bench to decide the matter at hand.

COURT ANALYSIS AND JUDGEMENT:

Taking into account the nuance of Article 13(2), the court ruled that the State is prohibited from making any law that takes away or limits the rights conferred by Part-III, and that any law made in violation of this clause is void to the extent of the violation. Article 13(2) prohibits the making of any law, so it would apply to laws enacted after the Constitution’s inception, such as the case at hand. In this case, it has been determined that Section 6A of the DSPE Act violates Article 14 of Part III of the Constitution, rendering it void.

The court additionally clarified how the word “void” must be construed. It noted that “void” has been interpreted in a number of judgements of this Court from 1951 to the present, and has been given various names such as ‘non est’, ‘void ab initio’, ‘still born’, and ‘unenforceable’.

The court stated that once a statute is deemed unconstitutional for violating Part III of the Constitution, it is void ab initio, still born, unenforceable, and non-existent under Article 13(2) of the Constitution.

Hence, the appeal of CBI is allowed and set aside the order of high court.

 

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Written by – Surya Venkata Sujith

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Aligarh Muslim University’s Minority Status: A Legal and Historical Examination.

INTRODUCTION:

One of the oldest and most prominent universities in India, Aligarh Muslim University (AMU), has been involved in a legal dispute concerning its minority status for many years. Muslim reformer Sir Syed Ahmed Khan established AMU as the Muhammadan Anglo-Oriental College in 1877 with the intention of preserving Islamic values while addressing Muslim educational lag. The Muslim University Association and MAO College became a part of AMU when the Aligarh Muslim University Act of 1920 took effect. Whether AMU qualifies for minority status under Article 30 of the Indian Constitution in the present circumstances is the question.

HISTORICAL BACKGROUND:

Muhammadan Anglo-Oriental College, also known as Aligarh Muslim University, was founded in 1877 by Sir Syed Ahmed Khan. It was later incorporated by the Aligarh Muslim University Act of 1920.

In 1965, the Act underwent additional amendments, redistributing the Court’s powers among various bodies, including the executive, with the President of India nominating the governing body.

In S. Azeez Basha & Anr. v. Union of India, the dispute started in 1967. The petitioners contested AMU Act amendments, claiming that their rights under Article 30(1) namely, the right to establish and administer educational institutions had been violated. According to the Supreme Court, the efforts of the Muslim minority may have led to the 1920 Act’s passage. That being said, this does not mean that Aligarh University was founded by the Muslim minority in accordance with the 1920 Act.

In 1981, the Act underwent yet another amendment that defined ‘university’ as an establishment “established by the Muslims of India.” AMU instituted reservation policies in 2005, designating Muslim candidates for half of the postgraduate medical seats. Using the Supreme Court’s ruling in Azeez Basha as guide, the Allahabad High Court heard a challenge to this policy that same year. The argument was that since AMU is not a minority institution, the reservation is void.

The Allahabad High Court struck down the reservation policy, ignoring the 1981 amendment and ruling that AMU was not a minority institution based on Azeez Basha, rejecting the Union government’s and the university’s argument that the 1981 amendment rendered the Azeez Basha precedent invalid.

The reservation policy was put on hold in 2006 after an appeal was filed with the Supreme Court. The National Democratic Alliance government denied AMU’s minority status in 2016 by withdrawing from the appeal.

A three-judge bench referred the Azeez Basha ruling to a seven-judge bench on February 12, 2019, for review. The case was finally taken up by a seven-judge bench led by Chief Justice of India D.Y. Chandrachud on October 12, 2023.

LEGAL PROVISIONS INVOLVED:

All linguistic and religious minorities have the fundamental right to establish and administer any kind of educational institution they choose, according to Article 30(1) of Part III of the Constitution. Article 30(2) mandates that the State provide ‘equality of treatment’ to all educational institutions receiving aid, irrespective of whether they belong to minority or not.

PRESENT POSITION OF THE ISSUE:

In this case, the Supreme Court addresses two issues concerning the AMU’s minority status.

  1. What are the criteria for granting minority status to educational institutions under Article 30 of the Constitution?
  2. Can educational institutions established by parliamentary statute qualify for minority status under Article 30 of the Constitution?

Dr. Dhavan, the petitioners’ counsel, argued that a minority educational institution should not lose its minority status just because it is subject to statutory regulation and that the constitutional viewpoint, which supports the integration of liberal and religious education, should be taken into account.

He contended that the Azeez Basha ruling was in conflict with itself since the top court determined that a university had to be recognised by law for its degrees to be recognised. Nonetheless, the court found that AMU would lose its minority status if the statute were to recognise it.

Dr. Dhavan contended that this would nullify Article 30 and subordinate a fundamental right to a statute by requiring all minority institutions to apply for recognition under a statute and give up their minority status.

Dr. Dhavan emphasized that, for the purposes of Article 30, “established” includes terms like “found,” “recognise,” “confirm,” and “admit.” In response to a question concerning the distinction between “found” and “bring into existence,” he explained that the former refers to incorporation while the latter takes into account prior circumstances.

The respondent’s attorney is Tushar Mehta, the Solicitor General of India. He contended that unlike “nationalist” institutions that opposed and denounced the British government, Solicitor General Tushar Mehta asserted that AMU chose to be a “loyalist” institution and ceded its minority status to the government. Azeez Basha, he said, accepted this ceding of rights.

The SG contended in the Azeez Basha case that the ruling only applied to the 1920 Act and did not create a law that was generally applicable, implying that a university loses its minority status upon incorporation. He made it clear that the 1920 Act was the main focus of the Azeez Basha case, and that AMU is not a minority university under that Act.

Underlining the significance of AMU as a national university, Tushar Mehta asked the Court to consider the matter from a social justice standpoint in order to ensure that students from the SC/ST/SEBC sections have equal access to it. Currently, between 70 to 80 percent of AMU students identify as Muslims.

CONCLUSION:

From January 10 to February 1, 2024, the seven-judge bench, presided over by Chief Justice of India DY Chandrachud, heard arguments for eight full days.

The Chief Justice of India has reserved the matter to make a decision at a later time after considering all of the arguments.

The question of whether AMU can assert its minority status and whether the Azeez Basha ruling ought to be reversed will be decided by the court. In addition to AMU, this decision has significant ramifications for minority universities throughout India.

To sum up, the AMU minority status case emphasizes how important it is to strike a careful balance between historical context, legal interpretations, and constitutional rights. AMU’s minority status is in jeopardy while we wait for the Supreme Court’s ruling.

 

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Written by – Surya Venkata Sujith

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The Amendment to the Information Technology Rules is not intended to suppress criticism of the Government: Central Government to the Bombay High Court

Kunal Kamra vs. State of Maharashtra and Ors.

CORUM: Justices GS Patel and Neela Gokhale

Background of the case

The Information Technology (Intermediary Guidelines and Digital Media Ethics code) amendment rules, 2023, which give the Union government the authority to establish a distinct unit for fact-checking content from digital media and to order its removal if found to be “fake, false, or misleading,” was challenged by comedian Kunal Kamra in a petition filed with the Bombay high court on April 6,2023. The petition challenged the provision on the grounds that it violates Section 79 of the Information Technology Act of 2000 and Articles 14, 19(1)(a), and 19(1)(g) of the Constitution.

As a political satirist, Kamra had asserted that he is compelled to remark on the conduct of the Union government and its employees through the extensive internet and social media platforms in order to spread his work. His capacity to parody politics would be unjustly and excessively restricted if his content were put through an obviously subjective, hand-picked ‘fact check’ by a unit chosen by the Union administration. Therefore, he argues that satire does not lend itself to such a fact-checking effort by its very character. If political comedy were to be examined by the Union government and banned for being “fake, false, or misleading,” it would completely destroy the point of the genre.

Kamra argues that the ambiguity of “in respect of any business” and “reasonable efforts” will result in a chilling effect wherein intermediaries choose to resort to removing any data flagged by the fact-checking unit of the Union government rather than risk losing safe harbour.

Recent Developments in the Case

During the hearing of the petitions contesting changes to the Information Technology Rules of 2023, the Central government informed the Bombay High Court on Tuesday that humour or satire of any kind directed at any governing body is always acceptable as long as it is not offensive or contains obscenity.

The Ministry of Electronics and Information Technology (MeitY)’s Solicitor General, Tushar Mehta, stated that the laws are simply meant to control false news and do not forbid any expression of opinion or criticism against the government.

“Whether we like it or not, any sarcasm or humour directed towards the political establishment has nothing to do with this rule. Unless the humour crosses lines with inappropriate content like abuse or pornography. In any form, humour satire is always welcome. It can’t be forbidden. The administration is solely concerned about the spread of false information and the anonymity of the media. There is not even the slightest chance that any humour or satire would fall under this law.”

The Rules call for the creation of fact-checking units (FCUs), and the petitioners have particularly disputed Rule 3’s authority for FCUs to identify and tag what they deem to be “false or fake online news” in relation to government actions.

Solicitor General outlined how the fundamental rights of five different stakeholders—the internet user, the middleman, the recipient, the government, and the general public—have been taken into account when drafting the Rules. Also made clear that nothing is made illegal or contains any penal provisions in the Rules of 2023. He clarified that the Rules only govern the content and settle disagreements between the content provider and the harmed party.

According to him, the intermediary has three alternatives when FCU flags content: remove it; don’t remove it but add a statement that it has been flagged; or dismiss communication from FCU. The court questioned the need for the change if the government was not going to oblige intermediaries to abide by the FCU’s instructions.

There is a wider public interest on the one hand, and a statute with confusing language on the other. Will it ever allow us to include qualifiers that don’t actually exist? How may “shall” (stated in rule 3) be given a different colour to preserve the safe harbour clause) and how can we read information as fact? Is it legal to interpret clauses in this way? The court posed the query after the session was over. If a person is offended by the message, they might take the middleman to court, which would ultimately determine whether or not the content was true. the change was necessary because it would prevent intermediaries from using the “safe harbour” defence provided by Section 79 of the Information Technology Act to avoid liability.

The recent clarification given by the Central Government to the Bombay High Court is significant reassurance. However, there is still cause for concern due to the rules vagueness, especially in regards to the operation of fact-checking units and the potential chilling impact on intermediaries. Our legal system must strike a fair and just balance as this case progresses, protecting both the freedom to criticise the government and the need to combat the dissemination of false information. This case illustrates the importance of ensuring the appropriate and accountable application of democratic values and the free expression they entail, even in the digital era.

 

 

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Written by: Shivanshi Singh

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BHARATIYA NAGARIK SURAKSHA SANHITA BILL, 2023: An Overview

ABSTRACT

This research paper critically examines the significance, motivations, and implications of the Bharatiya Nagarik Suraksha Sanhita Bill of 2023, which aims to replace the outdated Criminal Procedure Code of 1898 with comprehensive changes across its 533 sections, including amendments to 160 sections, introduction of 9 new sections, and repeal of 9 sections. The bill’s introduction aligns with India’s transition from 75 to 100 years of independence, resonating with the Prime Minister’s call to eliminate remnants of subjugation and infuse an authentic Indian essence into the criminal justice system. The paper analyzes proposed amendments like technological integration, communication tools, protective measures, and handcuff regulations, as well as provisions related to mercy petitions, non-arrest sampling, police detention, and trials in absentia. While acknowledging the bill’s commendable efforts to modernize the system and expedite legal proceedings, the paper also highlights potential drawbacks, including evidence misuse, privacy concerns, and challenges in implementation. It concludes by stressing the need for a balanced approach that upholds individual rights while enhancing justice delivery through holistic legal reforms.

INTRODUCTION

In a significant move aimed at modernizing and strengthening India’s legal infrastructure, Mr. Amit Shah, the Minister of Home Affairs and Minister of Cooperation, took an exceptional stride by presenting three revolutionary bills in the Lok Sabha on August 11, 2023. These legislative proposals comprise the Bhartiya Nyaya Sanhita Bill 2023, the Bharatiya Nagarik Suraksha Sanhita Bill 2023, and the Bharatiya Sakshya Bill 2023, demonstrating the resolute dedication of the government to reforming the criminal justice system. By emphasizing the replacement of outdated laws inherited from the colonial era—the Indian Penal Code of 1860, the Criminal Procedure Code of 1898, and the Indian Evidence Act of 1872—these bills indicate a profound shift towards a legal framework that is fair, impartial, and centered around the well-being of citizens.

The Bharatiya Nagarik Suraksha Sanhita Bill of 2023, intended as a substitute for the Criminal Procedure Code of 1898, initiates comprehensive modifications within its 533 segments. It is noteworthy that the bill makes revisions to 160 sections, introduces 9 novel sections, and abolishes 9 sections.

The unveiling of these legislations occurs amidst a period characterized by swift technological progress, shifts in societal dynamics, and evolving international norms. The current regulations, established during the British colonial period, have frequently faced censure for their antiquated nature and lack of relevance to modern requirements. The fresh bills mirror the administration’s desire to harmonize the legal framework with the demands of the 21st century, highlighting legal architectures that prioritize citizens, encompass gender neutrality, embrace digital modernization, and emphasize justice as opposed to mere punitive measures.

ANALYSIS

 

WHAT PROMPTED THE INTRODUCTION OF THE BHARATIYA NAGARIK SURAKSHA SANHITA BILL?

The Azadi ka Amrit Mahotsav will conclude on August 15, 2023, marking the transition from 75 to 100 years of India’s independence, commencing on August 16. During his speech on August 15, 2022, from the Red Fort, the Prime Minister of India outlined the Panch Pran, or five vows, before the nation. Among these, one pledge is to eliminate all remnants of subjugation.

Spanning from 1860 to 2023, India’s legal framework for the criminal justice system persisted based on statutes enacted by the British Parliament. In light of this historical context, three bills have been introduced, aligning with the fulfillment of one of the five vows – infusing a distinct Indian essence to catalyze substantial transformation within the country’s criminal justice system.

SEVERAL KEY ALTERATIONS SUGGESTED IN THE PROPOSED AMENDMENTS TO THE CRPC INCLUDE:

  • Enhanced Technological Integration: The proposed amendments emphasize an increased utilization of technology in legal proceedings. This includes conducting trials, appeal procedures, and recording depositions, including those of public officials and law enforcement personnel, through electronic means. Accused individuals’ statements can also be documented via video conferencing. Electronic formats may be employed for summonses, warrants, documents, police reports, and statements of evidence.
  • Incorporation of Communication Tools: The bill introduces the concept of electronic communication, encompassing “communication devices.” As per court or police directives, individuals may be required to present any digital evidence-containing document or device for investigative purposes.
  • Handcuff Use Regulation: In cases involving repeat offenders who have escaped custody or committed serious crimes like organized criminal activities, terrorism, or offenses against the state, police officers may be authorized to employ handcuffs during arrests.
  • Specific Protective Measures: A prominent safeguard against arrests, currently outlined in Section 41A of the CrPC, will be renumbered as Section 35 and revised. An additional clause mandates that individuals cannot be arrested without prior permission from an officer ranked no lower than Deputy Superintendent of Police (DSP) if the offense carries a punishment of less than 3 years or if the individual is over 60 years old.
  • Mercy Petitions Framework: The bill establishes procedures concerning the timeframes for submitting mercy petitions in cases involving death sentences. Following notification from prison authorities about the disposal of a death row convict’s petition, the convict, their legal heir, or relative can submit a mercy petition to the Governor within 30 days. If denied, the person can appeal to the President within 60 days. No legal recourse against the President’s decision is permissible.
  • Prosecution Sanction: The government must decide on granting or denying sanction to prosecute a public servant within 120 days of receiving a request. Failure to do so will result in automatic sanction being assumed. Sanction is not mandated in cases involving offenses such as sexual crimes or trafficking.
  • Procession-Related Regulations: While the provisions empowering district magistrates under Section 144 of the CrPC remain unchanged, the power to prohibit carrying arms during processions, mass drills, or training sessions is omitted from Section 144A.
  • Non-Arrest Sampling: The proposed amendments permit magistrates to order individuals to provide samples of their signature, handwriting, voice, or finger impressions for investigative purposes without necessitating their arrest.
  • Police Detention Provisions: Provisions are outlined to empower the police to detain or remove individuals who resist, refuse, or ignore lawful directives during preventive actions.
  • In Absentia Trials: The framework for trials in absentia is outlined, particularly in stringent anti-terrorism legislation like the Unlawful Activities (Prevention) Act (UAPA). In such cases, the burden of proof shifts to the accused, requiring them to prove their innocence rather than the state having the responsibility to prove guilt.

 

IMPORTANCE OF THE BHARATIYA NAGARIK SURAKSHA SANHITA BILL:

This legislation holds immense significance as it aims to consolidate and modify the legal provisions governing criminal procedures. It introduces explicit timelines for expeditious investigations, trials, and verdicts, ensuring a swift dispensation of justice.

The bill’s essence lies in its commitment to hastening the delivery of justice, a crucial aspect in today’s fast-paced world. It aligns seamlessly with the Digital India initiative of the government, embracing the use of technology to enhance legal processes. For instance, the bill grants admissibility to digital or electronic records as evidence, granting them the same legal weight and enforceability as traditional paper records.

A notable feature is its focus on citizen-centricity, exemplified by the provision for promptly supplying a First Information Report (FIR) to complainants. Furthermore, victims are kept informed about case progress through digital means.

The bill introduces the concept of a summary trial for minor offenses, enabling a swifter resolution in such cases. Additionally, the innovation of a ‘Zero FIR’ is significant. This provision empowers individuals to lodge an FIR at any police station, transcending jurisdictional limitations. Moreover, it mandates the transfer of this FIR to the appropriate police station within 15 days, ensuring efficient handling of cases regardless of the location of the crime.

 

DISADVANTAGES OF THE BHARATIYA NAGARIK SURAKSHA SANHITA BILL:

While the Bharatiya Nagarik Suraksha Sanhita Bill brings about notable reforms in the criminal justice system, it is crucial to critically examine its potential drawbacks and concerns. These disadvantages can raise questions about the effectiveness and impact of the proposed changes:

  • Potential for Misuse: The increased use of technology, while beneficial in many ways, can also open avenues for manipulation and misuse. The admissibility of digital evidence might inadvertently allow fabricated or tampered evidence to be presented, raising questions about the reliability and authenticity of such records.
  • Privacy Concerns: The greater emphasis on electronic communication and digital records could potentially infringe upon individuals’ privacy rights. The collection and storage of electronic evidence raise concerns about data security and the potential for unauthorized access or breaches.
  • Summary Trials and Fairness: While summary trials are meant to expedite proceedings, they might compromise the principles of a fair trial. The swift resolution of cases might not allow adequate time for gathering evidence, cross-examination, or presenting a comprehensive defense, potentially leading to unjust outcomes.
  • Zero FIR Implementation Challenges: The provision of filing a ‘Zero FIR’ at any police station, although seemingly progressive, might pose practical challenges in terms of coordination between different police stations and determining the appropriate jurisdiction for investigation. The transfer of cases within 15 days might not always be feasible, causing delays and confusion.
  • Lack of Judicial Oversight: The bill places considerable responsibility on law enforcement agencies to decide whether to arrest an individual or not. This might lead to situations where the threshold for arrests becomes arbitrary, potentially resulting in the violation of individual rights and liberties.
  • Absence of Comprehensive Torture Prevention: The bill falls short in addressing comprehensive measures to prevent torture and custodial violence, which are significant concerns. The focus on speedy justice should not come at the expense of safeguarding the rights and dignity of individuals in custody.

 

CONCLUSION

In conclusion, while the Bharatiya Nagarik Suraksha Sanhita Bill presents commendable efforts to modernize and streamline India’s criminal justice system, it is important to acknowledge the potential disadvantages that come with such extensive reforms. Striking a balance between expeditious justice delivery and safeguarding individual rights is a delicate task. As the legal community and society as a whole engage in discussions surrounding these proposed changes, it is imperative to carefully address these concerns and ensure that the spirit of justice prevails, upholding both the rule of law and the protection of citizens’ rights.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Mansi Malpani

 

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The Three Major and Developments in Indian Corporate Law

Abstract

This paper explores three interconnected topics influencing the evolution of corporate India. Part 1 examines the landmark Supreme Court verdict on tribunalisation of company law in India, highlighting the debate over legislative competence, separation of powers, and the constitutionality of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT). Part 2 delves into the concept of independent directors, underscoring the need for redefining their roles, responsibilities, and selection processes. It discusses the challenges in maintaining true independence and suggests measures to enhance their effectiveness. Part 3 analyzes the position of statutory auditors in companies, particularly whether they hold an “office of profit.” It examines legal principles, corporate structure, and implications of appointing auditors without shareholder resolutions. By addressing these themes, the paper sheds light on critical facets shaping the trajectory of corporate India.

 

Introduction

The corporate landscape in India is undergoing transformative changes due to global market shifts, economic growth, power dynamics, and climate concerns. This paper delves into three interconnected topics that are shaping the evolution of corporate India. Part 1 focuses on the Supreme Court’s watershed judgment on tribunalisation of company law, discussing its implications, challenges, and debates. Part 2 examines the concept of independent directors and their role in corporate governance, suggesting reforms to enhance their efficacy. Part 3 analyzes the position of statutory auditors and the question of whether they hold an “office of profit” under the Companies Act.

Part 1: Tribunalisation of Company Law in India:

The Supreme Court’s judgment on the establishment of the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) is a critical development in the evolution of corporate India. This judgment has sparked debates about legislative competence, separation of powers, and the constitutional framework. The court’s decision to uphold the legislative competence of the Parliament to create NCLT and NCLAT is a significant validation of its authority to reform corporate justice. However, the judgment has also deemed specific aspects of the tribunal’s structure unconstitutional, necessitating amendments. This held in the case of Union of India v. R. Gandhi[1].

The question of legislative competence revolves around the constitutional provisions of Article 323A and 323B, which deal with tribunals’ establishment. Some argue that the court’s interpretation of these provisions can lead to potential conflicts with the principles outlined in Schedule VII of the Constitution. While the court’s judgment suggests a harmonious interpretation, concerns are raised about the potential erosion of separation of powers and the independence of the judiciary. This debate prompts reflection on the delicate balance between administrative efficiency and safeguarding the core principles of governance.

The issue of vesting judicial functions in technical members of the tribunal also draws significant attention. While the court acknowledges the importance of domain expertise, questions arise about the potential compromise of judicial independence. The requirement of technical members to possess certain qualifications might inadvertently dilute the tribunal’s decision-making autonomy. This leads to contemplation on whether expertise can genuinely replace the attributes of impartiality, judicial wisdom, and protection against external influences.

In the case of State of UP v. McDowell & Co.[2], a three-judge bench of the Supreme Court underscored that a law enacted by the legislature could only be invalidated based on two specific grounds: (1) lack of legislative competence, and (2) contravention of any fundamental right enshrined in Part III or other constitutional provisions. These two aspects form the core of the author’s argument, with the remaining aspects being extraneous to the present discussion.

However, the judgment does not definitively clarify whether the Parliament possesses the requisite competence or whether its actions run afoul of Article 323B of the Constitution. An additional concern revolves around the involvement of non-judicial individuals as adjudicators.

In this context, the foundational principle of the “separation of powers,” an inherent element of our constitutional framework, appears to be in jeopardy. While this concern is intuitively comprehensible, the author refrains from delving further into this extensively addressed topic.

Part 2: Independent Directors and Corporate Governance:

The concept of independent directors is integral to maintaining corporate governance and stability. However, the practical implementation often falls short of expectations. The definition of independent directors, as outlined by SEBI in Clause 49, is considered inadequate in ensuring genuine independence. The Enron case, where even the Dean of Stanford Business School failed to detect irregularities, and the Satyam fraud, which exposed gaping weaknesses in governance, underscore the urgency for reform.

The suggestion of statutory protection against arrest for independent directors becomes crucial in light of cases like Nagarjuna Finance, where arrests of former independent directors raised concerns. The fear of legal action can deter competent professionals from accepting directorships, leading to a potential shortage of qualified candidates. Transparency in the selection process, minimizing cozy relationships between boards and independent directors, and addressing conflicts of interest are all necessary steps to enhance the effectiveness of independent directors.

Furthermore, the paper’s recommendation for retirement policies for independent directors is based on the idea of maintaining fresh perspectives and preventing entrenchment. While concerns about industry experience are valid, the role of independent directors as enlightened generalists cannot be understated. Striking a balance between experience and a forward-looking approach is essential for a robust governance framework.

Part 3: Position of Statutory Auditors in Companies:

The role of statutory auditors in corporate financial irregularities has prompted discussions about their liability and accountability. The question of whether they hold an “office of profit” under the Companies Act raises pertinent issues. By examining legal principles and corporate structure, it becomes evident that statutory auditors are appointed by shareholders, indicating a distinction from the company itself. The intention of ensuring independence and an unbiased audit process reinforces the argument against considering them to hold an “office of profit.”

The term “office of profit” remains undefined within the Constitution of India. Through a series of judicial pronouncements[3], the Supreme Court of India has established a set of criteria to determine whether a given position qualifies as an office of profit under the government. These criteria encompass:

  1. The origin of the appointment, whether it emanates from the government;
  2. The authority vested in the government to terminate or dismiss the incumbent;
  3. The source of remuneration, whether disbursed by the government;
  4. The nature of duties undertaken by the holder, including their alignment with government functions;
  5. The extent of control exercised by the government over the execution of these responsibilities.

However, Section 314 of the Companies Act presents a challenge. This section requires shareholder approval for appointments to offices of profit, leading to potential conflicts with the role of statutory auditors. The paper highlights the need for careful consideration of these conflicts and their implications on auditor independence. Balancing the regulatory framework to prevent undue interference while maintaining transparency and accountability is essential.

While assuming an office inherently implies wielding some degree of authority, whether significant or subordinate, on behalf of a company, the assumption of a position or role need not invariably entail exercising authority. [4]In light of this context, it is not legally sustainable to assert that statutory auditors of a company hold a position of profit within the company. According to Section 314(1), the appointment of specified individuals to an office or position of profit necessitates shareholder approval through the passage of a special resolution during a general meeting. This requirement applies to instances like the appointment of a relative of an Independent Director to a position of profit within the company.

Taking into consideration the aforementioned rationale and in conjunction with Section 314 of the Companies Act, it becomes apparent that a statutory auditor can be designated without necessitating a shareholder resolution, even in cases where the auditor has a relationship with one of the Directors. Such a scenario could potentially compromise the autonomy of the Statutory Auditor, undermining their ability to function independently, devoid of undue influence from the company itself

Conclusion

the evolution of corporate India is at a critical crossroads, driven by factors spanning economic shifts, legal transformations, and ethical considerations. The analysis of tribunalisation, independent directors, and statutory auditors exemplifies the intricate landscape that shapes the future of Indian corporates.

The Supreme Court’s stance on tribunalisation highlights the delicate equilibrium between judicial autonomy and operational efficiency. Debates over legislative jurisdiction, separation of powers, and technical expertise underscore the need for a balanced approach that upholds legal principles while accommodating modern business complexities.

Within the realm of independent directors, fundamental challenges arise, evident in cases like Enron and Satyam. Calls for safeguards against unwarranted arrest, transparent selection processes, and well-defined tenures emphasize the urgency to foster a cadre of directors capable of championing robust corporate governance.

Amidst these debates, the role of statutory auditors emerges as a linchpin. The question of whether they hold an “office of profit” intertwines legal interpretation, corporate autonomy, and accountability. As the nexus between shareholder appointments and auditor insulation from direct company influence counters such categorization, their interplay with Section 314 necessitates nuanced consideration.

Overall, these deliberations encapsulate the convergence of legal doctrines, economic realities, and ethical imperatives in the corporate landscape. The pursuit of regulatory oversight while preserving entrepreneurial vigor stands paramount. As India strides forward, these issues signify not just legal concerns, but essential societal benchmarks. They underscore that the transformation of corporate India is not just a process of change, but a profound reimagining. The amalgamation of law, economics, and ethics constitutes a complex mosaic, posing challenges alongside transformative prospects for India’s corporate trajectory.

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Written by- Ankit Kaushik

[1]  Civil Appeal No. 3067 of 2004 with Civil Appeal No. 3717 of 2005, unanimous, judgment dated May 11, 2010, per Justice Raveendran)

[2] (1996)3SCC 709

[3] See Maulana Abdul Shakur v. Rikhab Chand and another (1958) SCR 387; M Ramappa v. Sangappa & others, (1959) SCR 1167; Guru Govinda Basu v. Sankari Prasad Ghosal & Others, (1964) 4 SCR 311; and Shivamurthy Swami Inamdar & another v. Agadi Sanganna Andanappa & Another, (1971) 3 SCC 870, Pradyut Bardolai v. Swapan Roy, JT (2001) 1 SC 136.

[4] Rendell v. Went [1964]2 All ER 464(HL)