NATIONAL COMPANY LAW TRIBUNAL
NATIONAL
COMPANY LAW TRIBUNAL
There is perceptible trend around the world towards
simplification or rationalization of legislations governing them. Time is ripe,
therefore it is to be ensured that dispensation of justice and disposal of
business matters by the court and authorities should be in tune with the speed
with which business is being transacted. This is in continuation of “ease of
doing business”.
NATIONAL COMPANY LAW TRIBUNAL (NCLT) is a proposed quasi-judicial body in
India that will govern the companies in India. It will be established under the Companies Act, 2013 and
is a successor body of the Company
Law Board. Establishment of NCLT is good for
east of doing business.
NCLT
is a “SIGNLE WINDOW INSTITUTIONS FOR COPORATE JUSTICE”.
Background
of NCLT:
Considering the laws on corporate insolvency, winding of
Companies and other such provisions with regards to company law prevailing in
industrially advanced countries, a High Level committee set up by the Union of
India in the form of The
Eradi Committee. The Committee examined various
legal laws, not only Companies act, 1956 and they felt need of some changes,
which made them to recommend various amendments which included the provisions
of setting up of NCLT & NCLAT
Pursuant to the recommendation of
the said committee the Companies (Second Amendment) Act, 2002 proposed the
creation of a NCLT, where in was provided that NCLT would look into majority of
corporate matters under the Conference Act. It was provided that NCLT will be
responsible for handling all pending matters before the Company Law Board, the
Board for Industrial and Financial Reconstruction (BIFR) and the jurisdiction
of the various company courts of the High Courts, apart from various other members.
SCOPE OF WORK: -
NCLT and
its appellate Tribunal were recommended which will have power of the:
·
Company Law Board under the
Companies Act, 1956.
·
BIFR and AAIFR under the Sick
Industrial Companies (Special Provisions) Act, 1985,
·
Jurisdiction and powers relating to
winding up, companies and arrangement and other such provisions, vested in the various
High Courts in India.
WHY NATIONAL COMPANY LAW TRIBUNAL?
The
genesis of setting up of specialized tribunals can be traced in the Supreme
Court judgment in Sampath Kumar case. In this case while adopting the theory of
alternative institutional mechanism the Supreme Court refers to the fact that
since independence, the population explosion and the increase in litigation had
greatly increased the burden of pendency in the High Courts, therefore, to
reduce the burden of High Courts and to fulfill the growing need for empowering
the Company Law Board, they felt the need to constitute a high-power Tribunal,
which could take up all matters relating to Company Law and other Corporate
Laws at one Forum.
Keeping
this in view, the 2002 Amendment inserted new Parts IB & IC in the
Principal Act for formation of National Company Law Tribunal (NCLT or Tribunal)
and National Company Law Appellate Tribunal (Appellate Tribunal) respectively.
Necessary Section 10FA was also inserted to provide for dissolution of the
present Company Law Board.
Accordingly,
on and from the commencement of the Companies (Second Amendment) Act, 2002 the
Board of Company Law Administration constituted under sub-section (1) of
Section 10E shall stand dissolved and all matters or proceedings or cases
pending before the Company Law Board on or before the constitution of the
Tribunal u/s. 10FB, shall, on such constitution, stand transferred to the National
Company Law Tribunal and the said Tribunal shall dispose of such cases in
accordance with the provisions of this Act.
REASON
WHY ITS CREATION BEEN CHALLENGED:-
The main
reason for the challenge was the constitutionality of the tribunal as it
involved the wholesale transfer of jurisdiction of the High Courts in company
matters to a quasi-judicial body. It was argued that such transfer will result
in vesting of intrinsic judicial functions in a quasi-judicial body, which was
vulnerable to executive interference.
Give Brief
Background of Case.
STEM BY GOVERNMENT FOR ESTABLISHMENT OF NCLT:-
v In a move that will help EASE DOING BUSINESS IN
INDIA considerably, a
constitution bench of the Supreme Court (SC) led by Chief Justice HL Dattu
upheld the constitutional validity for setting up the National Company Law
Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).
v That’s
an important step forward for the government. After all, There Are
Over 64,000 Cases Pending in The Supreme Court Alone as
of December 2014, with another 3 crore cases in the high court’s and lower
courts. Once these bodies are set up, as corporate cases move to the NCLT,
quite a bit of the pressure will be released from the country’s stressed legal
system, which will in turn help unlock the value of distressed corporate
assets.
v That
could be a huge plus for industry that is looking to make the most in an
otherwise sober market. While this one move brings in a lot of credibility to
handling disputes under the Companies Act, 2013, it will finally depend on how
quickly the government moves ahead and adopts the provisions stated by the SC.
That will be critical to its success. Considering the time and energy the Modi
government is investing on its Make-in-India initiative that should, hopefully,
not take too long. In turn, that would lead to more investment coming in over
the next few months, provided the global situation remains normal.
MEGA TRIBUNAL:-
NCLT
can be called as Mega Tribunal. Because NCLT will CONSOLIDATE the corporate jurisdiction of the followings:
·
Company Law Board.
·
The Board for Industrial and Financial
Reconstruction
·
The Appellate authority for Industrial and
Financial Reconstruction
·
Jurisdiction and powers relating to winding up
restructuring and other such provisions, vested in the High courts
FEATURES OF NCLT:-
· Specialized
court for the Corporate Members.
· This
will be only Tribunal for the Corporate Members.
· It
shall avoid multiplicity of litigation before various Forums
·
There shall be various branches of
the NCLT all over India, thereby providing justice almost at one’s doorstep.
· There
will be a mixture of judicial and Technical members while deciding matters
· There
shall a reduction in period of winding- up.
· Reduction
in pendency of cases.
· Expeditious
disposal of cases.
· NCLT
& NCLAT have deals with exclusive jurisdiction.
POWER OF NCLT:-
·
Power to seek assistance of Chief Metropolitan
Magistrate: The Tribunal may, in any
proceedings relating to a sick Company or Winding up of any other company, in
order to take into custody or under its control all property, books of account
or other documents, request, in writing, the Chief Metropolitan Magistrate
within whose jurisdiction any such property, books are situated or found.
·
Power to review its own order.
·
Power to order repayment of deposits accepted by
Non- Banking Financial Companies as provided in section 45QA of the Reserve
Bank of India Act, 1934.
SCOPE FOR PRACTICING COMPANY SECRETARY:
The establishment of NCLT/NCLAT shall
offer various opportunities to Practicing Company Secretaries as they have been
authorized to appear before the Tribunal/Appellate Tribunal (Section 432). Therefore,
Practicing Company Secretaries would for the first time be eligible to appear
for matters which were hitherto dealt with by the High Court.
Areas opened up for company secretaries
in practice under NCLT are stated hereunder:
·
Compromise
and Arrangement
·
Merger
& Amalgamation u/s 391-394.
·
Revival
& Rehabilitation of Sick Companies
·
Winding
up proceedings under the Companies Act, 1956
·
Reduction
of Capital
·
Private
liquidator and many others.
·
Right
to appear as Legal Representative
In view of vast opportunities emerging
with the establishment of National Company Law Tribunal, the Practising Company
Secretaries should standardize their competencies with the global benchmarks to
provide value added services in assisting the Tribunal in dispensation of
justice and speedier disposal of matters like merger, amalgamation,
restructuring, revival and rehabilitation of sick companies and winding up of
companies.
PROVISIONS UNDER COMPANIES ACT, 2013 - NCLT:
A. Background:
Companies Act, 2013 provides for the constitutions of NCLT and
NCLAT. The provisions dealing with NCLT and NCLAT are covered under the Chapter
XXVII of the Companies Act, 2013. Relevant sections relating to the
constitution of NCLT & NCLAT, qualifications and selections, term of
office, salary, allowance and other items and conditions of service of members
being covered under Section 407 to 414 in the Companies Act, 2013 were notified
on 12th September, 2013. Out of a total of 28 Section in Chapter
XXVII of the Companies Act, 2013 these 8 sections were notified while the
remaining 20 sections are yet to be notified. Rules under this chapter of the
Companies Act, 2013 have also not been notified in the Official Gazette (till
September 2014).
B. DEFINITIONS:
Members
|
Means
|
Definitions
|
Chairperson
|
The Chairperson of the Appellate
Tribunal.
|
|
Judicial Member
|
A member of the Tribunal or the
Appellate Tribunal appointed as such and includes the President of the
Chairperson.
|
|
Member
|
A member, whether judicial or
Technical of the Tribunal or the Appellate Tribunal and includes the
President or the Chairperson.
|
|
President
|
The President of the Tribunal.
|
|
Technical Member
|
A member of the Tribunal or the
Appellate Tribunal appointed as such.
|
C. NATIONAL COMPANY LAW APPELLATE TRIBUNAL:
Appeal
from order of Tribunal:
v Any person aggrieved by an order or
decision of the NCLT, within the period of 45 days from the
date on which a copy of the order or decision of the Tribunal, may prefer an
appeal to Appellate Tribunal.
v On receipt of an appeal from an aggrieved
person, the Appellate Tribunal may pass such orders, after giving an
opportunity of being heard, as it thinks fit, confirming, modifying or setting
aside the order appealed against.
v The Appellate Tribunal shall be made to
dispose the appeal within 6 (Six) months from the date of the receipt of the
appeal.
D. PROCEDURE AND POWERS OF TRIBUNAL AND APPELLATE TRIBUNAL:-
The
Tribunal and the Appellate Tribunal shall not be bound by the procedure laid
down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by
the principles of natural justice and subject to the other provisions of this
Act and of any rules made by the Central Government, the Tribunal and the
Appellate Tribunal shall have power to regulate their own procedure.
NCLT
Draft Rules are already in place and final Rules will be placed once the
provisions will be notified along with Rules.
E. Expeditious disposal by Tribunal and Appellate Tribunal:
Time period for Dispose of Application or Petition
|
Tribunal
or the Appellate Tribunal, as the case may be, for the disposal of such application or petition
or appeal within three months from the date of its presentation before the Tribunal or the filing of
the appeal before the Appellate Tribunal
|
If not dispose of within 3 month
|
Tribunal or, as the case may be, the
Appellate Tribunal, shall record
the reasons for not disposing of the application or petition or the appeal, as the case may
be, within the period so specified
|
Extension
|
The President or the Chairperson, as the case may be,
may, after taking into account the reasons so recorded, extend the period
referred to in sub-section (1) by such period not exceeding 90 (ninety) days
as he may consider necessary.
|
F. TRANSFER OF CERTAIN PENDING PROCEEDINGS (Section- 434):
On
such date as may be notified by the Central Government in this behalf-
COMPANY LAW BOARD
|
All matters, proceedings or cases pending
before the Board of Company Law Administration constituted under sub –
section (1) of Section 10E of the CA-1956 immediately before such date shall
stand transferred to the Tribunal and Tribunal shall dispose of such matters.
|
BIFR
|
Any appeal preferred to the AAIFR or any
reference made or enquiry pending to or before BIFR or any proceeding of
whatever nature pending before the AAIFR or the BIFR under the Sick
Industrial Companies Act, 1985 immediately before the commencement of this
Act shall stand abated.
|
HIGH COURT
|
All proceedings under Companies Act, 1956 including proceedings
relating to arbitration, compromise, arrangement and reconstruction and
winding up of Companies, pending immediately before such date before any
District Court or High Court, shall stand transferred to the Tribunal and the
Tribunal may proceed to deal with such proceedings from the stage before
their transfer.
|
The Central Government may make rules
consistent with the provisions of this Act to ensure timely transfer of all
matters, proceedings or cases pending before the Company Law Board or the Court,
to the Tribunal under this section.
G. APPEAL TO SUPREME COURT:-
Any person aggrieved by any order of the
Appellate Tribunal may file an appeal to the Supreme Court within 60 (sixty)
days from the date of receipt of the order of the Appellate Tribunal to him on
any question of law arising out of such order:
Provided that the Supreme Court may, if
it is satisfied that the appellant was prevented by sufficient cause from
filing the appeal within the said period, allow it to be filed within a further
period not exceeding sixty days.
H. SOME IMPORTANT FEATURES:
Ø Limitation Act
(Section-433): The
provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings
or appeals before the Tribunal or the Appellate Tribunal, as the case may be.
Ø CIVIL COURT NOT TO HAVE
JURISDICTION (SECTION 430):
This
section deals with exclusive jurisdiction of the Tribunal or the Appellate
Tribunal. No civil court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which the Tribunal or the Appellate
Tribunal is empowered to determine by or under this Act or any other law for
the time being in force and no injunction shall be granted by any court or
other authority in respect of any action taken or to be taken in pursuance of
any power conferred by or under this Act or any other law for the time being in
force
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: This Document is a copyright of Divesh Goyal. The entire contents of this document have been developed on the basis of relevant statutory provisions. Thought the author has made utmost efforts to provide authentic information however, the author expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this documents. This is only a knowledge sharing initiative and author does not intend to solicit any business or profession…
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