Hi, I am not sure I am an expert, but I have an opinion. Since the thesis defense is about the quality of the work contained therein rather than the writing quality of the document, I would see no problem with someone with a non-thesis masters degree who is competent being on the panel. Basically the idea of the defense is to see how the applicant answers questions about his work. He should be able to answer questions at any level.
Just to clarify the context. If you are referring to master's thesis defense and master's thesis writing, then I would say it is not necessarily unethical or improper. BUT, from the academic perspective, all things being equal, those who themselves have undergone thesis writing and thesis defense are more qualified and competent to be a thesis panel member and adviser than those who have not. Therefore, those who both have the competence and the relevant experience should have priority over those that do not have both. The latter may sit in the master's thesis defense panel or act as master's thesis adviser only in the absence or scarcity of the former.
Imo, your query has 2 sides: A) from a strict legal point, a person should only be an academic judge, if s/he has undergone the same procedure. B) from the viewpoint of available academic resources, somebody can be nominated to judge, even s/he has not undergone the same procedure.
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Principally, the whole affair runs down to a matter of fair judgement and competence, with respect to thesis, author of the thesis and evaluators (i.e. at least 2).
In our tech-know-logical age, all these procedures will rapidly and exponentially change, not only to mention open AI, GPT 4 and related tools, i.e. also academia will be disrupted by exponential knowledge automation.
Finally, I have also to mention the explosion of the academic ghost writing business, which puts or adds another dimension to your justified query, dear Jonaid M Sadang
The ethical practice is that you don't give what you don't have, and as of the Philippines, according to the CHED Order, instructions, and practices, no non-thesis is allowed to sit as a panel member of the thesis master because, look at what he or she never practices; how can they contribute to it? That is why it is not allowed for them to sit during panels. Some of them may be good advise or counsellor in time of giving guide but they are not allow to sit, hope i answered your query.
Can you cite the specific Commission on Higher Education (CHED) Memorandum Order that you referred to in your comment? I am from the Philippines and I am not aware of that specific prohibition. Maybe you can educate me. Professor Jonaid M. Sadang's question arises out of the lack of regulatory clarity on this issue, otherwise he would not have raised the question at all.