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 12^th 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…