When appointing goes wrong

Last week the United States Supreme Court decided a thought-provoking matter related to the appointment of administrative law judges in the Securities and Exchange Commission (SEC). Appointment of these judges had been challenged as it was contended by the petitioner that the appointment should have been made by the commission itself and not by the staff members of the commission. This is an exciting development and it will in all probability have indirect, though not direct, implications for the appointment of presiding officers in a large number of commissions, tribunals, appellate bodies, and regulatory bodies in India.

In the case Lucia versus SEC, the Supreme Court held that according to the Appointments Clause of the US Constitution only the President, Courts of Law, or Heads of Department can appoint such officers like the administrative law judges (ALJs). The question to be decided by the Supreme Court was whether these ALJs were officers or mere employees of the SEC. Though the decisions made by ALJs can be reviewed by the Commission, and appealed further in appellate courts, it was held that the ALJs were delegated with significant authority to hear and decide the matters, and, hence, it would not be proper to consider them as just employees. They are for all practical purposes "officers." As these appointments were not made by the Commission itself but by the staff of the Commission, the appointment of these ALJs was unconstitutional and could not be upheld by the court of law which means that they have been working without legal authority.

There has been indeed in the last five decades or so an exponential increase in the number of tribunals deciding matters related to specialized issues with typically one member as an expert of the subject domain and another member coming with the knowledge of the law, usually from the judiciary. At times there are more than two members – according to the statute which created that body – bringing with them experience and knowledge of different subjects required for making a thorough and holistic decision.

Interestingly there has been so much noise in India in the recent past about appointment of judges in higher Judiciary, as well as several challenges have been made regarding appointments to different tribunals and commissions, one of the most important being the Competition Commission of India, it can very easily be inferred from the American decision that the scrutiny regarding appointment of presiding officers and judicial officers in different judicial forums must be within the constitutional and legal framework and should be done after due diligence leaving no scope for doubt and confusion.

In the years to come it is being anticipated that the number of such forums is going to be on the rise within lot many being in the domain of banking and bankruptcy law which has created almost a Tsunami in the corporate and banking fraternity. The expertise required to man these positions is not ordinary. Insolvency professionals – key roles in the entire process of streamlining insolvency and bankruptcy – are expected to be knowledgeable in various disciplines and hence, the bar will surely be raised.

With more and more individuals required to perform numerous roles with significant authority and power, it needs to be ensured that the authority is properly delegated, and primarily the body delegating the authority itself has the legal authority to act upon.

Legal and constitutional scrutiny of appointments made at different positions is always not possible in courts of law, as things are made to work in good faith. Thus, it is incumbent on the state – primarily the executive – to be doubly sure that appointments are made after religiously following the laid down procedure. Of late, there has been a dispute about the appointment of a bureaucrat at a senior position, which technically was not vacant. It is about Vishnoi's appointment as Member of CBDT (Central Board of Direct Taxes) on July 31, 2017 the day Nishi Singh retired. Technically Vishnoi should have been appointed on August 1st, but had been appointed on July 31st itself creating an issue as to the legality of the appointment. How can two persons hold the same position at the same time? Needless to say, most of the decisions made and orders passed by Vishnoi – including the highly publicized Nirav Modi and Punjab National Bank investigations – are under a dark cloud.

The rule of law encompasses both substantive and procedural law, and remarkably, procedure may gain precedence at times.

The author is a professor at IIM-A,
akagarwal@iima.ac.in